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let me stay on that. it is my understanding that there is a united nations -- and we will ask more questions about this -- but the united nations peace of legislation that provides for the transfer of these people to this country for trial, so perhaps when our witnesses today to are all professionals speak, you can speak as to what we can do now to really see that these people get extradited so they go to federal prison and there is a significant deterrent produced. our reports suggested increasing dedicated assets for air support of counter narcotics missions prior to the united states military drawdown. while the state department agreed to purchase two
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helicopters for counter narcotics use, we asked them for more. the director of the international narcotics and law enforcement air wing 5 staff that based on mission requirements, a total of six are necessary. additionally, i recently learned that the two helicopter delivery is not expected until 2014. two f-61 delivery not expected until 2014, and we may well be withdrawing completely in 2014. this is very troubling and i hope we can cut through our own government red tape to get these helicopters to afghanistan as soon as possible. before i close, i would be remiss not to mention that counter narcotics effort has not been without sacrifice. on october 26, 2009, three d
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special agents were killed in a helicopter crash after a firefight with taliban drug traffickers that also claimed the lives of seven serviceman. on october29th, 2009, the remains of dea special agents forest lehman, chad michael, michael westin, and the fallen united states service members were met by president obama at dover air force base. he honored the men and paid his respects at the dignified transfer ceremony. co-chairman grassley and i wish to convene our deepest condolences to the families of these dea agents that gave their lives fighting narcotics trafficking in afghanistan and hereby enter their obituaries into the record for today's hearing. its hard i think for both of us to realize that we have
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people who carry out these missions and get killed carrying out these missions, and they do our country great service, and not much is said about it. but this committee wants everyone to know that we very much appreciate that service and we certainly honor it in the best way we can. so i would now like to turn to my co-chairman, senator grassley, for his opening statement. >> thank you for honoring the memory of those dea agents and the syathy that we extend to the family and the recognition of their important role in defense of our country, even though they are not in the military. this is a vry important hearing. i thank you for holding it. it is following up on what we did in 2009. toy's hearing let's us follow
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up on the counter narcotics program in afghanistan andsks the question what we learned since the year 2009, the year of our other hearing. this discussion is important today as october will mark the 10th anniversary of our involvement in afghanistan, and given the draw down o u.s. personnel, probably more important that we keep up to date to make sure that other things we're doing in afghanistan are on track. even after years of u.s. counter narcotics efforts, afghanistan continues to produce 90% of the world's supply of opium. at the time of our last hearing in 2009, witnesses reported a decline in poppy production due to the blight and drought conditions in other countries that increased wheat prices. however, united nations recently reported that opium production stabilized between 2009 and 2010. in july of this year, chairman
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feinstein and i released a report that she's already talked about. this report was endorsed by all the members of this drug caucus, and of course contains nine recommendations. and we believe that these will ha a very good impact on our current efforts. in our report, we recommended adequate resources be provided to the dea within current budgetary constraints to increase the number of personnel dedicated in investigation and interdiction. dea funding for operations in afghanistan flows through the state department. one year after we issued our report, we remain concerned about the state department's decision to reduce funding for deas, operating expenses in afghanistan, and doing it without adequate explanation. the state department and dea need to resolve any differences and provide designated funding
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for dea, counter narcotics activities to ensure there is no gap in capability. i understand that chairman feinstein has been closely monitoring this situation, and i wholeheartedly support her calls to ensure that dea operations are adequately funded by the state department. i want to ensure that both agencies can reach an agreement on this necessary funding and that agreement is real and n simple window dressing for today's hearing. the 2010 caucus report also focused on changes. the counter narcotics strategy focused on interdiction, alternative development and following the money. i support these efforts but also believe that crop eradication should be part of our counter narcotics program. in oer parts of the world, crop eradication has proven to
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be an effective deterrent, basically when used in conjunction with alternive development programs. in our report, the drug caucus recommended crop eradication as part of comprehensive strategy, saying expert testimony that founder add indication equals pressure which forces the drug traffickers to make mistakes. these mistakes provide opportunities for law enforcement intelligence and military assets to break up trafficking rings, terrorist cells and ultimately the finances that support insurgent operation. unfortunately, the administration found it necessary to taker add indication off the table in 2009. i want to know more about how the administration's decision not to utilize eradication as an option has impacted the amount of opium cultivated in afghanistan and whether reinstituting these policies would help reduce the size of
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opium production. on another front in afghanistan, our efforts to combat money laundering and terrorist financing ought to have priority. money fuels the insurgency, and cutting funding needs to be very much at the forefront of drug fight. opium emerged as a significant funding source for terrorism since the fall of taliban regime in 2001. the opium trade is currently estimated to be worth $61 llion and accounts for roughly 50% of afghan's gdp. drug money funds more than just terrorist activity. it is also used to corrupt government officials and ultimately threatens destabilization of the country. we must remain vigilant against money laundering and terrorist financing by ensuring our laws keep pace with new and emerging
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trends terrorists exploit. we are reaching a point where the administration will soon be decreasing presence in afghanistan, while reducing the military footprintn afghanistan and increasg the operational capacity of afghans to govern their n country needs to occur clear, coherent planning must take place in advance. plans need to be in place to deal with drug trade and how counter narcotics operations and investigations continue absent security provided by u.s. military. we need to ensure law enforcement agencies likes dea will still be allowed to step up afghan operations. i want to hear what steps the administration has tken to plan for eventual draw down of troops, what impact it will have on counter narcotics operations. i am concerned in the race to reduce the presence, we may lose any ground on the fight against
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drug trade in that country. i strongly encourage the administration provide congress with a strategy for the continuation of our counter narcotics programs as the number of troops is reduced. i look forward to hearing from witnesses today regarding the status of a government-wide counter narcotics plan, status of funding disputes between government agencies and also about what programs have been working and not wking in our current efforts to combat drug trafficking, money laundering in afghanistan. >> thank you very much, co-chairman. i would like to introduce our witnesses today. moving from my left to right, thomas harrigan, chief of operations for the dea, he's responsible for leading the worldwide drug enforcement operions of the agency's 227 domestic and 87 foreign offices,
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as well as special ops division, aviation dision, an office of diversion control. he was pointed to this position in 2008 and is a principal adviser to dea administrator on all enforcement related matters. on february 16th, president obama nominated mr. harrigan to be the dea's deputy administrator. i'll go on and introduce the other two gentlemen here, and then we'll go right dowthe line. william wexler, excuse me, is deputy assistant secretary of defense fo counter narcotics and global threats. he oversees a budget of over a billion dollars, leads department of defense's counter narcotics and threats finance policies and operations around the world. he has served as special advir to secretary of treasury, on staff of natiol security council, director for
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transnational threats and for global issues and multi lateral affairs. he received a bachelors degree in government and economics from cornell and master in public administration from the school of international and public affairs at columbia. finally, last but not least, brian nichols assistant deputy secretary of state for international law enforcement affairs. he entered foreign service in 1989, was promoted into senior foreign service in 2003. he previously served as deputy chief of mission in columbia. prior to appointment there, he served as director of office caribbean affairs. he also served as first secretary and deputy political counselor at the united states embassy in mexico, from '98 to 2001. mr. harrigan, if we could begin with you, please.
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you lead what i think is a very impressive organization, and i think you heard both the co-chair and myself indicate what we think some of the problems are, and i'll just say in terms of eradication, i debated tt very heartily with richard holbrook, and did not feel crop eradication was worth it. we did not agree at the time we debated it. i would like a little update on what is going on in that area as you speak as well. please proceed. >> sure. well, again, chairman feinstein, co-chairman grassley, i appreciate the opportunity to testify today before the caucus, and i appreciate the support and commitment that you've shown dea, especially in afghanistan. i would also like to acknowledge and thank you for placing the
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obituaries of our three former agents on the press table. just a brief side story. about three months ago, i received a call from the widow of forest lee man, and she was three months pregnant when forest was killed with their first child, and just want to report to the caucus little luke is doing fine. we hope that he's in the cod ray of dea special agents in about 25 years. but again, i truly appreciate theaucus recognizing our three fallen agents and the seven service meers we lost as well. what i would like to do today just for the sake of brevity, chairman, is give you quickly a pass, present, future snapshot of dea in ahanistan. as you know, dea was positioned in afghanistan back in the mid '70s, when the vast majority of heroin seized in the u.s.
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came from southwest asia. we were there in 1979 during the soviet invasion. they basically were coming in the front door, we were going out the back door, and we closed operations until we opened if again in 2003, and we were there on a tdy basis. then in 2006, we received funding and and we placed 13 permanent positions, that's agents and analystsnd support personnel in afghanistan, and then in 2008, as you very well know, we expanded significantly in afghanistan to where we placed 81 full-time agents, analysts and support personnel in afghanistan. again, that would make it dea's third largest foreign office behind colombia and mexico. so again, just giving you a sense on the issues that dea deals with in afghanistan. now, dea's two primary objectives in afghanistan are,
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one, to identify, investigate, disrupt and dismantle the drug trafficking organizations, particularly those with the nexus to insurgent and terrorist groups. and secondly, is to build and extend the capacity and the capability of or afghan counternarcotics police, primarily the national interdiction unit, the investigation unit and technical investigative unit. what i would like to do is just briefly go into our two priorities and give you an update and status on those two initiatives. first, as you mentioned, chairman, in your opening statements, so many of the operations we have had have resulted several years ago initially the extra diction, some transferred to the u.s. and some have been lowered to the u.s. the first extra diction which occurred in 05 was that
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of hajidi b as mohammed and received 15 years incarceration. again, that was signed by president karzai prior to the afghan parliament convening, but again, it w the first extra diction. some of the other significant traffickers we have been able to target and arrest -- hajiji ju makan perhaps the most prolific herointrafficker. he was to the united states in 2008 and first prosecuted under the patriotic architect, narco terrorism act. another key trafficker is khan mohammed, the first narco terror conviction and sentenced to two life tms her in the district of columbia. so again, just to give you a broad snapshot of the significance of the targets and organization that is we're identifying in afghanistan.
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again, in afghanistan, our personnel, all our personnel, are forward deployed. again, chairman, as you very well know and the co-chairman, our personnel do two-year tours in afghanistan. to be quite hont with you, it helps us quite a bit building up the relationship with the afghan counterparts. they're deployed to kandahar, helmand and gentlemen lal bad the iocc, where we coordinate and deconflict sensitive operations, drug operations, terror -- operations targeting terrorists with the interagency. we also belong to the afghan threat finance cell, the atfc where we attack the financial networks that support the insurgency and other terrorist organizations and we have recently formed the northern border working group comprise of central asian countries in addition to afghanistan in addition to the united states
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and to russia. we also have our fast teams, our foreign deployed advisory teams where two of the agents killed in afghanistan in 2009 belonged to. again, we have exceptional integration with the u.s. military and isaf forces. they're trained by special forces of the united states and they basically execute high-arrest arrest and search warrants in conjunction with our agents and afghan personnel in afghanistan. just for briefly, i see that -- i appreciate the fact you put up the photos. that is very typical of what we see in afghanistan. this was part of an operation that was conducted, joint operation with the u.s. military, with the department of state, helicopters, the uhis and isaf forces called "operation car dan" and you can see just betweethe opium, the chemicals, the heroin, weapons,
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ammunition, again, this is a typical scene of some of the these drug bazaars we raid each and every day. and again, they're based on arrest and search warrants sworn by our afghan counterparts. thes not dea agents. it is not u.s. agents. it is the afghan counterparts that go before an afghan judge, raise their right hand and swear to the affidavit. relative to capacity building, you heard before of thesui. you have currently 77 officers in the siu. we have about 520 in the niu and in the tiu we have approximately 9 and that's close to the table of organizion so we're very breezed with the progress there. and again, as i said before this committee when testifying on south america, they minimize corruption to a significant, significant extent. again as i said, it is the afghans that swear to the
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affidavit, write the reports, confer with prosecors and try these cases. another program is our judicial wire set program. we're going throughome technical glitches right now but overthe two-plus years we have beenble to legally and judicially intercept over 15 million calls from 2,600 target phones and gives us just an incredible, an inredible tool to fight these terrorist and drug trafficking organizations. relative to a way forward, chairman, what we need to do is, again, as you certainly addressed in your opening statement, we need to continue to engage the government of afghanistan on an extra diction tool or some other lawful transfer agreement. we need to do that. we, dea, needs to continue to improve our integration and coordination with the u.s. military and our afghan forces.
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we also need to expand our comfort shl source network throughout the region and i think more importantly need to try to move counter narcotics from a national security issue, if you will, to a law enforcement issue. and what i'd like to do in closing, two months ago in february, outgoing departing ambassador iken barry summed up i think eloquently dea's operations in afghanistan. i'll be very brief but he said here and i quote, dea's mission in afghanistan led the way in rule of law efforts designed to impact the insurgency where it hurts the most, raising funds and tackling corruption. dea's mission combines growing law enforcement capacity with realtime mission effects. through drug lab raids with elite forces, undercover operations, using modern investigative techniques and pursuit of shadowy money trails that fund much of the
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insurgency, dea's work is what can be accomplished in afghanistan with a well-designed, bilateral relationsh. and again, chairman, i will defer to my good friend brian from department of state on the eradication issue if you don't mind and i'll certainly chime in. again, we have a minimal role in eradication piece but i wod -- >> do you want to make a brief comment on the helos? >> yes, certainly. as far as the helos, you're right. i had found out that the sakorskys are due to arrive in 2014 but over the course of the last 12 to 18 months, i believe it was based upon really general petraeus and again, i'll defer to my other good friend here at the table, will wechsler, but my understanding -- well, i know that general petraeus had eleved counter narcotics on his priority list.
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and it certainly made available to us the military's air assets. the aiu program iknow will will discuss. the uwis of state. the chinooks of the military. we have not had any issues over the course of at least last 12 months, chairman, with getting and obtaining the assets, the air assets, that we need to safely and swiftly conduct operations such as this that you see here so it's gone very well over the last 12 to 18 months and we're very confident it will certainly continue. >> thank you very much. thank you, mr. wechsler for that. i appreciate it. would you go ahead, please? >> thank you very much, chairman feinstein, co-chairman grassley and senator udall. i'll be very brief because i know you have my written statement for the record. first of all, i do want to thank you for all the support that this caucus gives to our counter narcotics efforts in afghanistan
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and truly around the world. i do -- there is a long way that we have to go on a lot of the issues that you discussed. and you have framed the challenges that we confront very well. but i do want to explain just for a moment if i could some of the real important progress that we have made relatively recently, just picking up on some of the comments that tommy made right at the end. in the last couple of years, we have really fundamentally reorganized our counter narcotics efforts from a department of defense perspective along the four key elements of strategy. policy, our organizational structure, our resources and our leadership. and those are the pieces that you have to have in place in order to have a real effect. we have moved sharply from a policy that previously limited
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in the last administration the ro that the department of defense could play in the nexus between the narcotics traffickers and the taliban into a place where we are directly targeting them. with o colleagues in the law enforcement community. we have recognized that as attacking the networks requires a comprehensive, whole of government approach, recognizing that d.o.d. alone does not possess the legal authorities, skills or tools necessary to afct these kinds of targets in this kind of war. we have to partner, we have to do this in an interagency fashion if we're going to achieve our military objectives and in the end of the day go where tommy was saying from a national security problem to a law enforcement problem entirely. we have learned that it takes a network to beat a network in the d.o.d. saying. and we built a kind of fusion centers to make the best of the targeting techniques honed by the military over the recent years in iraq and afghanistan
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called find, fix and try to get inside the turning radius of your enemy's decision making. fortunately, today, as tommy mentioned, we have a variety o highly trained reliable partners in specialized afghan counter narcotics unit. the defense dertment is proud of the resources it's provided in conjunion with our friends from state. and of course, through the support of this caucus amongst others up on the hill for the aviation intradiction unit, the technical investigations unit. we also provide resources to interagency mechanisms such as the operations coordination center that tommy mentioned combined joint interagency task force, nexus in kandahar, the afghan threat finance cell and helped to stitch together the organisms in a matrix of decision making and prioritization procession for the coordination and action and
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perhaps most importantly we have the right leaders in place that really fully appreciate the role that counter narcotics plays in this kind of war that we're fighting in afghanistan. i would be remiss if i didn't mention specifically in addition to general petraeus, who did, indeed, change a lot of the way that is we approach these, general allen from back in ce - cent-com who's a real leader in this effort. brigadier generalmcmaster all of whom recognize that the illegal narcotic industry is sbi intrinsically linked. >> i just want to stress that statement. that statement you made i think is very significant. >> thank you very must have, senator. i'm pleasedo report that even though the narcotics problem as proven to be an extraordinarily difficult challenge as you would expect given the percentage of
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global heroin that comes out of afghanistan, as a result of our new policies, oanizational structures, our resources and the leadership, we're now seeing really important dividends from the sustained investments we have made. may 15th to june 15th of this year as was mentioned u.s. and coalition and afghan military officers and law enforcement agencies conducted an operation that means strangle. the department of defense designed to support 30 days of counter drug operations. the operation was the first sustained counter drug operation synchronized among multiple law enforcement and military elements. these operations focused on narcotics networks with a southern afghanistan, destroying multi-ton quantities of narcotics and leading to the rest of numerous individuals by afghan law enforcement. while the full resul are being analyzed, at this early stage of the operation appears to have
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had a real effect on the enemy and dmon strarted resolve to enforce the rule of law throughout southern afghanistan and attack insurgent networks in places previously untouched and techniques previously unemployed. and in another encouraging development, poppy cultivation appears to be declining for the third straight yr in 2011 according to u.n.est maits. if this preliminary estimate holds, it will be, quite frankly, a surprise and in stark contrast to widespread predictions of a rebound because of prices going up. this notable trend can be attributed to improved security by the afghan national security forces, u.s.-supported efforts and the efforts of the afghan government to discourage poppy cultivati cultivation. again, madame chairman, i appreciate the opportunity to testify and look forward to your questions. >> i was reading your written testimony and on page 11, you point out that between may 15th
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and june 15th, and this is the 94 missions on the narcotic insurgent couption nexus that that -- those operations resued in denying the enemy $5 million in drugs and currency, seizure of 5 metric tons of homemade explosives, enough to make 236 improvised explosive devices. the arrest of 25 suspects and the elimination of approximately 100 insurgents from the battle space. i mean, i'd say congratulations to all of you. >> thanks. >> mr. nichols? >> chairman feinstein, so- >> could you turn on your mike? great. >> chairman feinstein, co-chairman grassley, senator whitehouse and senator udall, thank you for your opportunity to discuss u.s. governmt counter narcotics programs in afghanistan. the department of state's bureau of international narcotics and
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law enforcement affairs or inl which i help to lead administers a va vie ri of counter narcotics rule of laws corrections and police training programs in afghanistan in support of u.s. policy objectives and at the direct request of the government of afghanistan. our efforts there are part of the larger interagency and international fight to stem the narcotics trade that helps fund the insurgency, fuels corruption and drivesrippling addiction amonafghan families. in concert with our afghan and international partners we have made major strides in reducing pop sy cultivation, cutting opium yields an increasing the ofessionalization of the afghan police, prosecutors and judges that go after the traffickers. since 2007, afghan poppy cultivation has fallen by more than one third. these gains have bee real and substantial. they're also fragile and dependent upon our having the continued resources to do the
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job and the afghan government's continued commitment to fighting drug production. in 2010, roughly 3,600 metric tons of open yachts worth an estimated $65 million on the global market were introduced into the economy of afghanistan. we know that narcotics are key funding sources for insurgent operations in afghanistan and afghanistan's success in reducing this funding source for the insurgency will have a direct bearing on the ability of u.s. and coalition forces to turn over security responsibilities to the afghan government. inl programs directly support our goals at both ends of the drug supply chain by targeting the insurgent narco trafficker nexus while enhancing suprt for elicit agriculture, counter narcotics law enforcement, demand reduction,ublic information and rule of law
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capacity. all of these efforts cenr on building the afghan government's ability to take a greater responsibility in the fight against narcotics. where dea actively menrs and conducts joint operations with vetted units within the counter narcotics policeof afghanistan or cnpa, inl air sis tans provides funding support to those activities and also export mentors who teach the cnpas mid level officers the mid level skillso run law enforcement operations. another cornerstone of the u.s. counter narcotics strategy in afghanistan is a development of sustainable agricultural alternatives to poppy. inl programs communicate the harm of the drug trade to afghan citizens, they introduce an element of risk into elicit crop planting decisions that farmers make a encourage provincial leaders to reduce poppy cultivation. these efforts from integrated
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with other efforts of afghanistan which focus on building the agricultural sector as an engine for job growth and higher incomes for rural families. we also have the ministry for counter narcotics or mcn develop public information campaigns to inform public opinion on narcotics issues. these public infortion efforts are complimented by the funding for the ministry's good performers forum with projects in provinces that reduced elicit opium cultivation. senator grassley asked about our eradication efforts and my good friend will referred to the progress that we have made in helmand province. as part of our governor-led eradication program, which reimburses the expenses of governments for afghan-led
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eradication, the area eradicated under that program has increased by re than 65%. very much in response to the efforts of our colleagues in the isaf and international coalition to provide security and the efforts of the ministry of counter narcotics to increase support among the governors. widespread drug addiction is a significant threat to afghanistan's future. addiction not only provides a sustainable domestic market for drug traffickers but also threatens the health of the next generation of afghans. to respond to these challenges inl is working to delop a drug treatment system for afghanistan. we currently support 29 drug treatment centers in 16 provinces including 6 centers for women with aegis ent centers for drug addicted children. it's well over half of the
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available treatment options within afghanistan. the challenges of reducing the threat of afghan narcotics remain profound. however, the transition to afghan lead is beginning to show results. key ministries are growing in capability, provincial governors showed greater commitment to cutting poppy cultivation and security forces are more effective and exnding the operations in traditional cultivation areas. with your guidance and continued support, inl will continue to develop programs that meet evolving challenges on the ground and work with our interagency partners to meet these important objectives. i and my colleagues inl are grateful for your continuing support of our important work. thank you and i look forward to your questions. >> thank you very much, mr. nichols. and i note in comments that the price is going up which is always good news so i want to just say congratulations, everybody. mr. nichols, as you know i was
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troubled to learn earlr this year that the dea's operating budget in afghanistan which s paid in '09 and '10 through a fund appropriated through the state department is not receiving the support it should in 2011. i wrote a letter to secretary clinton on january 25th expressing the concern. the president's budget once again provides funding to state that i would hope is in part intended for dea. but it is, again, unclear stating that, and i quote, up to 230 million end quote may be transferred by the secretary of state to other agencies operating in afghanistan. now. i understand that in the days leading up to this hearing this issue was resolved. i'd like your clarification on this and here's the question. will the state department
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provide dea with funding for counter narcotics operations in afghanistan? if so, how much? >> madame chairman, i am happy to report that we have been in close consultation with our good friends in dea and that we are le to fully support their efforts for thiscurrent fiscal year. we have been working very hard to ensure that our authorities allow us to provide full funding for their operations, as well as their capacity-building ka i activities whiche traditionally fund through the inkle account and we have reached agreement on that and we're going through the process of effecting that transfer and making sure that dea can continue its important work. going forward, we've alrea begun discussions for the next
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fiscal year 2012 and how we can cooperate in that area and identify the needs that dea has and ensure that they're fully met going forward. we in thisl are committed to working as closely with dea to ensure that they have everything they need to do their important work. >> well, let me respectfully suggest to you just as the tke down of osama bin laden dicated that we have got to move now aggressively and get the rest of al qaeda leadership, the good work that's been done to bring up the price, t make cultivation more difficult, to make the arrests and create the sentencing mechanism for people also has had an affect and i think now's the not the time to stop. now is the time to continue. so i will take you at your word, mr. nichols, that they will be fully funded. >> i think we better get the
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opinion of dea whether or not they think that -- >> shall we do that? >> yes. >> all right. let's do it. mr. harrigan? >> brian, could you please raise your right hand? i'm only -- well, thank you very much but brian was right on, chairman. we have been in discussions over the last -- over the last several weeks, and i want to personally recognize brian and ambassador brownfield from inl who have really i think taken it upon themselves to try to identify funds to make sure that dea is able to backfill some of our va cannot positions in afghanistan so there's no doubt in my mind it has been worked out as brian said for 2012. we have received commitments and if we do receive the commitments we have discussed, i am absolutely confident that we will be at full capacity in afghanistan. >> well, thank you very much.
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and please tell secretary clinton i very much appreciate this. thank you. what, if anything, is state going to expedite thearval of the two helicopters? >> we will in next month be able torovide an additional medium air lift capability in afghanistan. three c-4-46 helicopters will arrive in august and be available to support dea operations. >> oh, good. >> we still have -- >> august of what year? >> next month. >> oh, next month? good. that's great. and what are those helicopters? >> those a ch-46s so we're having an interim fill while we wait for the s-61s. >> how many of them are available? >> three will be available in august and we'll get five next year. >> that's terrific. >> for a total of eight. >> that's terrific.
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thank you, thank you. let me ask this question of mr. harrigan. it is my last question. are there specific cases against afghan drug traffickers for which you hope to have extradition but were unable to get the afghan government's agreement? >> well, we did. we worked very closely with the embassy in kabul, chairman. there have been a few cases, and again -- >> how many or a few? >> well, we used some of the in my opening statement, some of those significant traffickers that i discussed in my opening statement -- >> no, no. you dcussed people that have been brought to justice. >> yes. >> i'm talking about -- >> pending? >> the kingpins you want to extradite but can't. >> well, we have -- without going into specifics, chairman, i'd be happy to brief you in a more appropriate setting. but -- >> is it mo than one? >> well, right now, it's not a question as far as a matter of
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numbers. we do have individuals identified who are what we consider sea pots, the kingpins, the consolidated priority organization targets in afghanistan. but they are -- let's put it this way. they're not at a point in the judicial press we would be indicting them any time soon or seeking thei extradition from afghanistan. >> have they been arrested? >> no. so there's no one pending right now that we've seen -- >> all right. okay. >> -- we seek the extradition of this. >> is this putting a dampe on your work? >> well, it makes it difficult because,again, some of these -- there will be a day where these organizations and organization heads are arrested by the afghans. and i assume at that time we would request their extradition to the united states and again it would be incumbent upon the
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government of afghanistan to make that decision and hopefully, like i said, if it's not an extradition treaty, it may be as you referred -- referenced earlier, the '88u.n. convention that allows us the transfer agreement. hopefully something will be worked out by then because i believe it would certainly test the will of the afghan judicial system to try some of these very significant and prolific drug traffickers in afghanistan. >> i would hate to think you're holding up operations. >> we are not. let me assure you. we absolutely are not. >> okay. i think that's important. >> no. >> and i would urge you to see the attorney general because he has indicated his support. >> yes, he has. he's been extremely supportive. >> get what you need to do what you need to do. >> yeah. we are. let me absolutely assure the caucus, we are not slowingown or curtailing operations, hoping one day that an extradition treaty is signed. we go where the evidence takes us as quickly or unfortunately
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as slowly as smetimes itoes but we continue full speed ahead. >> thank you. >> you're welcome. >> mr. chairman? >> it's unfortunate that we didn't get your testimo until after 5:00 last night because my staff briefed me last night or late yesterday afternoon, and so, we have got some questions here based upon the fact that we didn't have your testimony. now, sometimes it's very legitimate that we not have testimony maybe until late but th hearing was announced two months ago and i don't understand why we couldn't have had it up here. but the testimony includes some inconsistencies and contradictory facts. give you an example. state department's written testimony states there were roughly 3,600 metric tons of poppies cultivated. the defense department testimony has the figure at 3,200 metric tons.
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another example -- state's testimony highlights, quote/unquote, peak cultivation l levels. however, defense department testimony has peakcultivation at 202,000 hectors, 207 curnt cultivation. if the administration can't even get the base figures right, how are we expected to have effective coordination strategy? given the delay in getting the testimony, these are the questions i have. so mr. nichols and mr. wechsler, why are your testimonies inconsistent on base facts about the levels of narcotic production and cultivation in afghanistan? but more importantly, which estimates are correct? >> while i'm tempted to say that
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everything will does is right and everything i do is wrong, our source for thedata that in my testimony is the u.n. office on drugs and crime which is an assessment of opium cultivation in afghanistan. and that's the source for the number that is are in my testimony, senator. >> yeah, like i say -- all i can say is we'll get you the answer. might be a timing issue. >> cooperation and coordination among the agencies, our report recommends a strategy for continued counter narcotics operations followed anticipated withdrawal of u.s. troops. mr. nichols, has such a strategy been discussed and developed and if not the reason? >> the special representative for afghanistan and pakistan leads our overall policy efforts
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ande are supporting his efforts, ambassador grossman's efforts, to develop all of the different elements of our policies. >> tried to get him here but couldn't. >> okay. so, in other words, you aren't in a position really to answer my question? is that what you're saying? >> yes, senator. i would defer to the special representatives office. >> then would you since the question is to you would you get me a written answer to the question? >> i will, sir. >> thank you. mr. harrigan, what are dea's plans for continued operations should military forces draw down to levels that would not allow adequate support for your operations? >> well, again, co-chairman grassley, i have been in discussions really for the last 18 months with my counter part at the podium here, mr. wechsler, as well as our regional director in afghanistan with the u.s. military and si isaf forces.
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dea has no intention of drawing down any of our 81 personnel. it would be a bit premature to see right now how the drawdown will impact dea but let me assure you we continue to work with the u.s. milita, isaf and counter parts in afghanistan so when the day comes that the military does draw down, that dea will still be able to operate effectively and most importantly safely. because we do need the u.s. military assistance and security that they do provide us but we continue to work that through. but again, we have absolutely no intention of drawing down our personnel, again, as the chairman indicated as long as the funding is available. >> okay. let me ask all of you starting with you, mr. harrigaharrigan, n the other two jump in. what efforts are under way to coordinatend deconflict activities between various counter narcotics operations among each of your agencies?
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>> well, one of the centers that both i and will and brian may have mentioned business the isocc, if you think of it domestically, it is like a decon flix and coordination center. if we're going out on an operation like we have discussed, we make sure that all the information we have, the locations of the targets, the names of the targets, if there's telephone numbers available, any financial information, goes in to thesocc. the isocc scrubs all that information, makes sure that all the -- all the participating groups in that particular facility isc recognized that dea and our counter parts will be conducting an operation on particular targets on a particular day at a particular vicinity. i am very comfortable withhe protocols and policies that we
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have in place in afghanistan. have had any issues we had have been very minimal as far as decon flix. but the decon flix coordination piece i think works extraordinary in afghanistan. >> thank you. >> thank you very much. oh. >> like to hear from the other two if i could. >> beg your pardon. sure. >> if you ask that question two years ago you would not have had a satisfactor response but because of the organizations that we have structured, because of the integration as i was described, we now have the right structures both at the operational level or the isocc working with the ijc to do the planning that was required for law enforcement operations and at the tactical level down with nexus in our rc south and southwest and the other ones to bring the plans into fruition, coordinate while they're going
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on and then do the analysis required afterwards for the next planning exercise. this is -- this is required, quite frankly, a degree of cultural attunement both the law enforcement and the defense side. both sides, both the militaries had to learn about how the law enforcement processes work. law enforcements had to learn how military operations work. and together we found that they're far more powerful than they were separately. >> mr. nichols, do you have anything to add? >> our role would be through the aviation wing in kabul. we're sort of the net jets provider to dea. they tell us where ey want to go, when they want to go. we make sure they have the assets to go. >> okay, thank you. will we have a second round? >> you can. certainly. thank you very much. early bird senator udall? >> tnk you, madame chairman. >> you're welcome. >> thank you for you and senator grassley holding this aring.
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and i thank our witnesses for your commitment, i know, and very, very difficult circumstances over there in afghanistan. i want to step back a little bit from senator grassley's question because he was talking about conflicting numbers in various parts of your testimony, and have you try to paint a picture for us in terms of your mseasurs of success in terms of how we're doing with poppy on the ground there, the heroin on the ground, i mean, one number was thrown out, i think by yo mr. wechsler in terms of reducing by one third or fallen by one third since 2007. and the kind of numbers i'm looking for you to paint in the big picture along the lines of, you know, how much poppy is exported out of afghanistan and is that up or down in terms of
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the years? is there more cultivated throughout afghanistan? are we up and down in terms of those numbers? and obviously, the insurgency gets its dollars from this drug trade. and so, are the dollars that you estimate from them to carry out the insurgency, are they getting more money now or less? and just kind of looking at the big picture to give us a sense of how we're moving in terms of our successethere. if each of you could do that from your own perspective i think it might put those numbers in a little different light. >> well, thank you for the question, senator. from dea's perspective, you know, it's a couple of interesting thing that is we have seen over the years due to the -- i think the successes that we have realized, again, with my interagency partners,
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and of course, with the afghans. there's sort of a change in the drug paradigm now in afghanistan where years ago where you had the organizations, whether it was run by -- khan mohammed, they were very, very sort of linear, if you will. we have seen over the course of the last year or so they're developing more into the cartels we see in mexico and colombia, those that are much more sophisticated where they have organizations, where they have transporters, where they have distributors, where they have people that provide protection for the particular loads. so from dea's position, it is made it that much more difficult as far as identifying some of the lab locations. now, another interesting thing is we have seen over the course of the last 18 months and i think it's attributable to,
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again, the success of the afghans and the interagency in afghanistan is very rarely do we see the large loads of heroin that we saw a few years o. you know, multi-ton loads. even back i believe it was 2008, 2009, "operation albatross," largest drug seizure in history. over 250 tonsf hashish. we see -- we do not see that anymore when it comes to heroin because it appears that the organizations because of the enforcement pressure put on these organizations, not only by the u.s. military and isaf and afghan forces and law enforcement community,e have seen them no longer stockpiling the heroin. what they'll do is they'll receive an order from a particular trafficker, say either in turkey or somewhere in the middle east or russia, and what they'll do is they'll immediately produce that order, whether it's 100, 200, 300 kilos
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and the heroin immediately moves out of afghanistan. years ago, that was not the case. we were seeing when we would hit these lab locations up here, we would typically see several hundred kilos of finished product, of heroin at a time. we are not seeing that anymore. we are seeing the chemicals, the acidic, the soda ash separated from the opium and when an order is placed, that when it is made and produced into heroin and moved out. so again, it has caused us to refocus our enforcement groups in afghanistan to where we now have five strike force that is are strategically forward deployed in afghanistan working with the afghan counter parts, our sensitive investigative units and the u.s. military and isaf forces to, again, target these organizations and create, if you will, a ring around
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afghanistan t allowing the heroin to leave, and again, not allowing the chemicals to enter into afghanistan. i would defer to my friends on the panel here relative to the numbers, the production numbers d the cultivation numbers, as well. >> if i could suggest, senator, that as far as our metrics, it's important to take these in and somewhat of a chronological order. the first one is to disrupt the neorks allied with the taliban and achieve the military objectives on the ground to bring ski to the area much we have been talking about a lot of that here. the second one is to build afghan capability over the long run to be a long-term partner for dea. so that this can be dealt with as a law enforcement program and to transfer the skills and the
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capabilities to the after ganls as you're building up those skills. it tends to be at least in my experience in looking at this the longer term trend is the declining production. so for instance, we started plan colombia, you know, at nearing the end of the clinton administration. and we are seeing now significant declines in overall production of cocaine in colombia. those tend to -- first you get security. then you get governance and then the overall strategic level decline in production. i suggest that might be a good way to look at the metrics. >> mr. nichols, if you have anything to add to my question. >> i would second my colleagues' remarks, senator, and also note that what we're seeing, again, is a drop in the area, the total area under cultivation in afghanistan but that's being
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driven particularly by gains in the south and as will alluded to those gains are being facilitated by a combination of our own progress militarily and strong leadership on the part of the afghan officials, both at the gubernatorial level and in the ministry of counter narcotics in afghanistan. >> you now, i was looking for more in the way of specifics like i think mr. wechsler got when he talked about, you know, one -- down by one third and then 13. you may not have those numbers but i hope that you will answer that question for me in terms of where we're headed and what are the mseasures of scess. i mean, how much -- it seems to me it's important to know, are the numbers going down on up
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when koit comes to the amount o dollars the insurgency is getting off the drug trade, are the areas of cultivation going up and down? not just one province of helmand. the ne reports out there seem to suggest that if since we have en there it spread widely, more widely poppy cultivation. i'm trying to get a sense of you who have the numbers and know what they are, is that a distortion or is that happening? if you could try to answer those for me in specific numbers that would be great. i realize you might not have them now. thank you. thank you, mr. chairman. >> senator, if i might, i do know and again correct me if i'm wrong in 2010, i believe the estimates were 98% of the opium grown was in the south and in the west in afghanistan. again, that's why we focus most of our resources down there because that's the one area where most of the poppy
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certainly being cultivated. the overwhelming majority is down in the south and the west. >> thank you. >> thank you, senator jew dal. senator reich? >> pass. >> okay. we'll have a second round. why don't you begin, senator? okay? >> absolutely. for mr. wechsler, wanted to bring up the national guard counter drug schools and the vital training they provide for federal, state and local law enforcement. and that, of course, deals with combatting drug trafficking. last month, i sent you a letter expressing my concerns over the possibility that some of these schools might be closed or the focus of the programs significantly altered. i stated in that letter as i do today any effort to close school or alter a program to train less law enforcement is an effort to weaken the effectiveness of these schools and hurt ability to -- of law enforcement to combat drugs.
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so, has there ever been a proposal discussed internally to close any national guard counter drug schools? and if so, please tell us which school or schools and why. >> sir, no, there is not such a propal before me right now. where we did have a significant issue was withhe continuing resolution, and the fact that we were under a continuing resolution and caused a lot of problems in -- as i understand, what i heard from the comptroller and from our legal authorities about how we could fund some of those schools during that period that we were in the continuing resolution. we are in process of looking at the schools as we do every year in the budgetary process and we will be -- i do remember your letter and it will be quite -- it will be an important add to our process. >> i think you got just about to
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my second question but let me ask it any way and maybe be a little bit more specific s. there a proposal or efforts to alter counter drug school training prrities? and if so, discuss with me the new priorities or why the priorities are being shifted. >> i think i'm going to have to defer you to the national guard for exactly how that program is managed. again, my knowledge is that the biggest issue that we ran into ecifically with the schools was regarding the continuing resolution which caused a significant amount of problems in the management of those schools. but the wider management of the program and how the schoo as one part of the wider 54 state and territory national guard counter drug programs are being managed i look to the national guard to make those decisions. >> are you in a position to get
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me an answer from the national guard on that point? >> absolutely, senator. >> let me follow up with a couple other questions that you probably can't answer now but along the same lines. whether or not they or you would agree with the premise that a few u are law enforcement personnel are able to receive specialized counter drug training whether it would reduce the effectiveness of the efforts to eradicate the drugs in the country and what shift of priorities would have on training school ank you. could i go on to continue to ask -- well, this would be of all three of you. in our 2010 report, we included a report that the afghan judicial is, quote, not capable of handling the prosecution and incarceration of high-level drug traffickers. this was a similar of other countries including mexico.
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the caucus report on mexico earlier this year discussed how extra dictions put traffickers behind bars despite concerns of trials and incarceration there. i'll start with mr. nichols. what is the status of the proposed extradition treaty between the united states and afghanistan? >> senator, i will have to get back to you on the specific status of the extra digs treaty. >> that's okay. i'll be glad to have you take that recourse. can i also ask you, in secure ing -- well, let me ask you this. and ybe you can't answe this either, but is securing an extradition treaty with afghanistan a priority of ours?
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>> i would give you my personal opinion -- >> just answered it. >> the -- having served for three years in colombia and worked closely with my colleagues at the table in that context where extradition was an incredibly important tool, i believe that extradition is vital for our global efforts to counter narcotics trafficking and should be something that we work on in as many countries as we possibly can. >> whoa, whoa, whoa. wait a minute. you didn't really answer his question. he said, is it. you said, i believe. is it a prime priority? yes or no? >> yeah. that's what i'd like to know. i believe since you don't want to answer it, probably not a priority. >> yeah. >> i would defer to my colleagues on the special representative for afghanistan, pakistan on how they would -- the many important priorities
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that we have in our relations with afghanistan. >> can you deliver him to this committee? >> i can certainly convey your request to the ffic >> that would be appreciated. >> thank you, madame chairman, for that. corruption's another area that afghanistan and mexico have in common. for example, major crime task force in the sensitive investigative unit were involved in providing support to afghanistan investigators last year who ultimately arrested the aide to president karzai and the chairman's already referred to this. ultimately president karzai's worked directly to secure this aide's release. mr. nichols, "the washington post" reported last year that secretary clinton called president karzai to express the displeasure with, quote, any decision that undermines the anti-corruption efforts. what impact has this case d on u.s. cooperation with afghanistan in investigating public corruption? >> as tommy noted, the
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investigations into corruption in afghanistan are very important to us, and we see that the units that we work with py an important role in anti-corruption efforts. we through inl support a number of units that play a role in that. the sensitive investigations unit, the technical investigations unit which dea both mentor, as well as the major crimes task force that the fbi mentors. we're committed to continuing those efforts and we believe that there has been important progress against mid-level officials but there is a tremendous amount of work tt needs to be done in terms of high-level corruption.
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>> well, so you're saying -- i think you're saying then that this intervention by president karzai in this high-level person has really dampened the efforts of cooperation for from that country on getting high-level corruption? public corruption. >> high-level corruption continues to be a significant issue and one that we need to continue to work on. >> so, we are not getting the cooperation of the afghan government? >> the afghan government cooperates on anti-corruption efforts in a number of areas but i think when you talk about high-level corruption, we could see greater progress. >> go ahead. >> follow up. >> do you want to? >> if i may, also, senator, just very briefly, and again, brian picked up on this and alluded to this, but again, that's the importance, senator grassley, of these sius. again, they are leahy vetted.
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we do backgrounds on them and six wes of training at the dea academy. we cannot eliminate corruption but it's the officers that continue the work closely. with this salahi issue, blieve me, did not dampen the enthusiasm of the afghan investigators whom we work with on a daily basis. that's sort of maybe the good news story there. we continue to work very closely in targeting the high-level corruption. >> ell, let me pick it up from there. it's my understanding that in april of '09 president karzai issued a decree that pardoned and ordered the release of five drug traffic els who are caught with more than 260 pounds of heroi and convicted for prison sentences between 16 and 18 years. true or false?
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>> i would have to gethe exact details, chairman, but i do believ -- >> either they were pardoned or not pardoned. >> i believe they were, but again, i would have to get extly which particular case. >> well, can you get that information? >> i could certainly confirm that, yes. >> okay. to what extent is the afghan government involved inrug trafficking? >> well, again, this is from dea's perspective, as brian alluded to earlier, we are concerned with levels of corruption in the afghan government but the bottom line is we don't know what we don't know. we continue to work closely with these sius utilizing our judicial -- >> for a moment, forget the sius. you are head of the whole thing. >> yeah. >> surely it would come to your attention. do you believe that the afghan government is involved in drug
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trafficking? >> well, we do not have any specific information, because let me assure you, if we had information or any details or evidence, we would certainly pursue it. there's no one telling us not to pursue a particular investigation, chairman. so let me assure you there's nothing stopping us or slowing us down. if the evidence is there, we'll pursue it, take it to the very end. >> good. mr. wechsler? >> yes, senator, if i can say, this problem that you mentioned has been identified by isaf as one of the key challenges that must be addressed as part of our overall military strategy and as a result, we have set up cjaf -- as i mentioned before, which means transparency to put the kind of counter network techniques and analysis that we have used in other context against this problem s and our conclusion is that one of t
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most damaging forms of corruption is criminal patronage networks. the networks that undermine goveance, that are sometimes allied with the drug trade, that siphon money off of program that is are designed to help the afghan people. and that in overall have a negative anti counter insurgency effect. and this task force, in cooperation with our law enforcement partners, is identifying the tynes of targets and the kinds of effects that you need to have in order to combat these criminal paet ronnage. >> i appreciate at. there are a lot of rumors around about how this works. and i'd like that you all take a look at it and report back to us what is fact and what is fictio and how deeply government officials, if they are at all,
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are involved in drug traffickinging or receiving drug monies. i was just handed a document from the congressional research service that said despite united states and other donor nation investmentnd supporting afghan counter narcotics justice reform, some analysts and donors are concerned that a lack of afghan political will to adhere to the rule of law may undermine international efforts. in a, well, it guess into the five drug traffickers and 260 pounds of heroin, prison sentences. and according to reports, one of the convicted traffickers was a relative of normaler governor haji din muhammad and car caye's decision to release the traffickers was viewed mainly as a campaign maneuver to gain
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favor with political supporters, including hashy din muhammad. i don't know who he is. maybe you do. but it's out there now. and i think, you know, our responsibility i to look at these countries and i think if we're supporting a government that's partaking in either the forgiveness of drug trafficking or complacent in drug trafficking we should know. a lot of nods. yodidn't nod, mr. nichols. okay. three nods. >> if i could have two little short questions and then i'll -- i guess this would be of mr. harrigan. how many times has dea argued for extradition but has been
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denieded the ability to seek extradition by the state department? >> well, it's not the state department, sir. it is, again, probably, off the top of my head, and i could certainly confirm this for you and i will get it for you, maybe on three or four occasions there there was high level traffickers where we submitted for the u.s. state department or questioning their extradition. >> well, then when you did that, did the state department try to seek extradition because you just said before you answered my question, it's not the state department. then you just said it was the state department. >> maybe i misspoke. again, it is absolutely not the u.s. state department. we work extremely closely with them in matters such as this. >> okay. >> and the department of justice. >> well, then you said you sought their help. and then do they follow through to seek extradition of the
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people who asked them to seek extradition. >> absolutely. the department of justice and respective district here in the united states of the u. s. attorneys' office who was -- >> okay. well, then, that answers that question. >> let me ask my staff. on another point, this is for mr. reschler. aside from the development of extradition treaties as the defense department established any protocol or procedures for considering the use of military commissions to prosecute highevel terrorism targets that may alsoçó be guilty of narcotics violations? >> not specifically for narcotics violations, but there are others in the department of defense that have been working on this issue. i will go back with their question and make sure you have an answer. >> okay. thank you very much. >> thank you very much, senator. >> thank youmadam chair. the key here on prosecutions is
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the judicial system, obviously. and i think -- are you, for the most part, when you develop the evidence using their judicial system or tryingo go the extradition route as others have asked about me? >> well, senator, it depends really on the level trafficker. low level trafficker is we typically keep in the afghan system. they have done a masterful job at training afghan prosecutors. as a matter of fact, they've written most of the counter narcotics laws so they closely mirror ours in the united states. it is though high-level traffickers that only time will tell if the afghan judicial system is mature enough, if you will, to prosecute and handle those traffickers. and it's those traffickers that we, agai seek their
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extradition. >> and for the traffickers that you're developing the evidence, putting them into the afghan courts, some of the reports that have come out, there's a report by this special inspector general for afghan reconstruction that talks about the lack of capability and capacity of the courts. how would you, in terms of a law enforcement official, rate their courts or grade their courts? how are they doing? how far have they come in the period of time they've been there d you've been observing this. >> thank you, senator. it's certainly something -- it's a little out of my lane as far as the court stfpl i can certainly get an answer for you. but from my opinion from what i have seen, it may note perfect but over the course of the last six or seven years it has certainly developed, i think, into a very, let's say a decent
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system that is ableo handle traffickers again at a certain level. they have come a long way. i have been to afghanistan about a half dozen times. every time i return i see the court system and the criminal justice task force has developed even more than the time before. so is it perfect? obviously absolutely not. but it's certainly gotten better over the years. >> thank you very much. and whatever you could supplement that would be great. >> thank you very much, senator. and gentlemen, thank you very much. i think you've been terrific. and i really appreciate it. and i think you know you have the support of this committee on both sides for whatever it's worth or not worth. but i know sometimes law enforcement likes to have some support on their side. in this case mr. harrigan, you certainly do. mr. wechsler, thank you for caring. i know defense has many other
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things, but i think this is really important. and mr. nichols, please, again, relay my thanks for the funding of dea. and we look forward to the job getting done in a very so thank you, gentlemen. and the hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]
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>> conn congressman john martin -- larson offers his thoughts on what is ahead for entitlement programs and what it means for democrat in future negotiations. "newsmakers" tomorrow at 10:00 a.m. and 6:00 p.m. eastern. >> what would it be like to meet these people? >> following the rise of adolf hitler and the third reich in his latest, "in the garden of beasts." >> ideally outsiders come ideally americans, and then is when i stumbled upon the first ambassador of not to germany >>
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politics and intriguing in nazi germany on "q&a." >> it takes "a behind the stacks look." and it uncovers the mysteries that even nicolas cage cannot conquer. "the library of congress" sunday at 9:00 p.m. eastern on c-span. >> former pakistan president musharraf says he is saddened by a deteriorating relations and said he knew nothing about osama bin laden's presence in his country when he was in power. he plans to return to seek the presidency. he spoke at the woodrow wilson center in this is just over one ever. -- over one hour.
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>> good morning and welcome to the wilson center. for many of you, including president musharraf, welcome back. we have overflow crowds be fitting an important visitor and an important speech. i am the relatively new president and ceo of the wilson center. i am a recovering politician. i spent nine terms in the u.s. congress. some would say, and i would agree, that my timing in terms of leaving was impeccable. this is the second time the center has hosted a public address by former president of pakistan pervez musharraf. we have a commitment to provide better communication and understanding between pakistan in the united states. pakistan and u.s.-pakistan
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relationships are a big priority. we organize events on a monthly basis. senior pakistan officials also regularly speak here. earlier this spring, we hosted pakistan's finance minister. we bring in columnists and journalists. in addition to our regular fellowship competitions, open to all nationalities, our asia program sponsors a fellowship open to only pakistani scholars. one of our former scholars was written while he was a woodrow wilson scholar and is with us today. where are you? please stand. welcome. our asia program has undertaken an extensive review of the assistance program and will
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rollout recommendations of that plan. the house foreign affairs committee yesterday "fenced" funding for economic and military assistance to pakistan until the president certifies there is adequate cooperation on counter-terrorism. that is just one house committee, but that is a move that, some feel, maybe going in the wrong direction. economic assistance is crucial. president musharraf's speech comes at a timely moment. relations between our two countries are more strained today than at any time in the last 10 years. each country needs the other for the achievement of important strategic objectives. most of the public discussion of the bilateral relationships focus on art division and disagreements. perhaps today's session will
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serve to remind us both that we have a commonality in interests in countering terror threat, jump-start a stalled economies, and recovering after calamitous earthquakes and floods. as a member of congress over nine terms, i belonged to the pakistan american caucus and visited over 20 times. i also represented a large and fractured pakistan community in los angeles, many of whom president musharraf knows very well. i saw much beauty in pakistan, especially in places like lahore. i also saw the devastation after the floods and the tribal areas separating pakistan and afghanistan. general musharraf was a new president on 9/11 and spent the next seven years as our world changed radically. president musharraf, a career
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army officer and a veteran of the 1965 and 1971 wars against india allied pakistan with the united states in, what i believe, was the misnamed war on terror. certainly it was a war against al qaeda and president musharraf was our ally. he allowed u.s. troops access to pakistan military bases and airports as well as other support. it was, and remains, a turbulent time. the good news was the serious effort in educational reform and these things that are now stalled because of a more recent development. the embarrassing news was the discovery in 2005 that the father of pakistan's nuclear bomb sold technology to north korea and elsewhere. then there were the protests by the legal community about the below the -- validity of the
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2007 election and the horrifying assassination of bhutto. events since have been more challenging. the takedown of osama bin laden, something that we all applaud, has exposed deep conflicts. the government recently ordered 200 special forces trainers to leave the country which resulted in a suspension by the obama white house of $800 million in u.s. military aid. yesterday, congress has taken a more severe position, or at least one committee, and we will see where that goes. but the bottom line is that both sides are frustrated and angry, but both also understand how crucial it is for our relationship to survive.
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he announced his intention to return before the next general election in 2013. before asking president musharraf to come to the podium, i want to read knowledge the wilson center council and alliance members, who might think are here today. margaret goodman, tom and claudia, welcome, and any of you who want to join the welcome counsel, this is not a hard thing to do. following remarks, he has agreed to take questions in the able director of our asian program, sitting right there, will moderate that part of this morning's session. with that, president musharraf, welcome back to the wilson center and it is my honor to introduce former president, and
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perhaps future president, pervez musharraf of the country of pakistan. [applause] >> congresswoman harman, ladies and gentleman, it is indeed my crown privilege to have been given this opportunity to talk to you and i am extremely grateful to the woodrow wilson center for courting me this opportunity. i intend to talk to you for about 30 minutes and that will set the stage, for i hope, a lively discussion. i will speak, basically, and pakistan on the region, and i
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call this "pakistan -- a reality check." i will highlight issues for pakistan and the region and set the stage for a lively q&a session. pakistan today finds itself in the eye of the storm of terrorism, an environment of a contradiction, mutual suspicion prevails, which is detrimental in this recent global war on terror. the situation demands a clearer understanding of reality is in south asia reaching the acute trust deficit and also, may i say, developing a unity of an action among all the players fighting the war on terror and in south asia.
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may i also venture to say playing games, and sensitivity to each other and our national interests is certainly very counterproductive. it definitely saddens me to see the deteriorating pakistan-u.s. relations especially after 2000- 2008 which sought a mutual understanding, mutual cooperation, and understanding the role that both of us play in fighting the war on terror. ladies and gentleman, i would like to start by analyzing the existing environment in its historical perspective. how did religious militancy get
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introduced into the region and into pakistan? it is pakistan a victim of terrorism or is the perpetrator of terrorism? very briefly, i would like to take a historical world view to put the facts in front of you. in 1979, ladies and gentleman, on the soviets invaded pakistan. as a result, the united states held pakistan, in their own interests, and decided to launch a jihad, a holy war, against the soviet union. we called it a holy war because we wanted to draw holy warriors from all over the world and we drew about 30,000 warriors into
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afghanistan. not only that, but we also trained, armed, and inducted taliban from the travel agencies and put them in afghanistan. from 1979-1989, for 10 long years, we introduced religious militancy in the form of a jihad. during this time, they decided to abandon, the fight against the soviets were spearheaded by religious militant groups. then, in 1989, to our west in india, a struggle for freedom erupted in this had a tremendous public sympathy in pakistan. dozens of holy warrior groups,
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the much maligned names, and they are all products of the 1990's. they raised public sympathy and people were willing to go into kashmir and fight. this introduced more religious militancy in the east and the west. 1989-2001, 12 years before 9/11, i call this the time of disaster when the u.s. summarily decided to quit the region without any rehabilitation for those warriors who were armed to the teeth and did not know anything other than fighting. this resulted in ethnic war lordisms for groups fighting
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each other, ravaging afghanistan and pakistan. those were brought in between 1979-1989, they coalesced into allocated. -- al qaeda. osama bin laden and all of these others came in during that decade. we then saw the rise of the taliban. they controlled 90% of afghanistan. this fighting, the eruption of taliban, al qaeda,, the .ntroduction of a kalashnikov finally, 9/11, the terrible
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terrorist attack on the world trade center in the u.s. military offensive in afghanistan, all of the al qaeda and taliban ran into the mountains and cities. therefore, ladies and gentleman, religious militancy we saw in the east, in kashmir, and religious militancy in afghanistan had pakistan and in the center. this was how religious militancy was introduced. the situation was perfectly normal until 1979, but things got disturbed after that for the reasons that i have told you. pakistan, therefore, ladies and gentleman, faces four menaces, i would say.
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number one is the minister of al qaeda. while they were in our mountains, they were reduced in number. the second menace is the talent and, who were dismantled and the organization disrupted after 9/11, but in 2004 there was a resurgence of the taliban and now it is the taliban who have strength in afghanistan and in the tribal regions of afghanistan and trying to read beyond. the third-is the taliban trying to spread their views of our religion, islam, and trying to move in beyond in pakistan. the port is extremists within
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our society. they are the holy warriors, as i said, who went into indian held kashmir. and some pockets in pakistan, some people, extremists, they are working with pakistan and afghanistan, but this is extremism within our society. ladies and gentleman, i say that the social fabric has been torn asunder beyond 1979. it is all that has historically happened in our area. i would like to touch on the very touchy issue. why is there so much animosity in the public by of the united
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states? this is trouble some because we're supposed to be fighting the global war on terror together. the governments are strategically aligned to defeating terrorism, but the public view of the united states is bad. may i venture to give some reasons? in 1989, for 42 years from 1947-1989, we were aligned during the cold war when the war was bipolar, we were with the united states and the west as a strategic ally for 42 years. we thought the soviets for 10 years along with the united states and everything was happening from pakistan and we were an ally. there was no enmity until 1989.
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what happened after 1989 is the question we need to ask ourselves. may i say that in 1989, and the u.s. decided to change in strategic orientation, abandon the place, and they have a strategic policy shift against pakistan and and towards india. our ally of 42 years is put under sanctions and may i venture to say the enemy of those 42 years, because india was always there in the east, became the strategic ally. this was seen in the public of pakistan as pakistan having been used, ditch, and betrayed.
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then comes the u.s. nuclear policy. appeasement, strategic cooperation with india, very negative against pakistan. this is seen as animosity against pakistan, national sensitivity comment national interest. our nuclear capability to everyone in the streets of pakistan is the pride of pakistan because it guarantees us security. it guarantees us against the existential threat that pakistan has been facing when we have fought three wars with india. it is the guaranteed of our security, the pride of every pakistani.
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anyone casting a negative bias towards our nuclear potential is seen negatively in the public eye. there are the indiscriminate drone attacks with the damage and also the strike against osama bin laden, a violation of our sovereignty as seen by the people of pakistan. these are all seem very negatively. 9/11 and its aftermath, when i decided to join the coalition, there were divided opinions in pakistan. people used asked me after my decision what made me believe that the u.s. would again not miss use us, did to us, and
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trieste? -- and betray us? i do not know if they will stabilize afghanistan by 2014, but maybe not. is leaving the area a reality? because than pakistan will have to come again, fend for itself and the situation will go back to 1989 with all of the groups fighting each other because of the vacuum that will be created in afghanistan with an unstable government, or maybe it will go back to 1996 with that taliban on one side and the ethnic groups in northern alliance on the other side. i personally believe if you leave afghanistan without stabilizing the state
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politically, the talent and is not a monolith under one had -- head, there is the hakkani and other taliban, all of these groups are often not in tandem with each other. many of them fight each other. it is not a monolithic, some maybe go back to 1989 where there will be chaos, confusion, and anarchy. it will leave us alone and fending for ourselves. this was why, as i said, there is a negativity against the united states.
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why is there a confidence and trust deficit between the u.s. and pakistan, which has been exacerbated all along, no trust in the last year-and-a-half, i think, finally leading to the action of osama bin laden which absolutely displays the lack between the two countries. very briefly, maybe it started back in my time. back in 2004 or 2005, but i had a strategy for dealing with the taliban. we started by putting together local meeting of ethnic elders.
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. through these meetings, my view was that [unintelligible] we should give them their legitimate right of being in a dominant government position in afghanistan. may i venture to say that even the united states should deal with them and put them in government in kabul. this window of opportunity was available between 2002-2004 because they were defeated, dismantled, and the military have developed and created a successful environment, a position of strength, a void and
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vacuum in afghanistan, but a change of policy but was required as a political instrument of making them join and putting them in a dominant position in government in kabul. the opportunity was, i think, mr.. i call this a great blunder seen from hindsight now. when i started going toward the tribal meeting of builders, this was seen as if i was leading at the taliban, which is far from the fact. we do not know who is who when 150 people are sitting in the tribal drum. each one of them is carrying a weapon.
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they all have a beard. whenever my strategy was come even if 50% are genuine people who would like to not be associated with the taliban, we should use them against the other 50 who may be double crossing. that was seen as if i was a double agent. all of my efforts, they were the ones to attack me personally, some i could -- how could i be a double agent? may i also add the view of the united states to leaving the strategic aspect of cooperations, with the -- which are to be addressed, but sometimes getting into the micromanagement of the modality of that strategy and tactics.
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of course, pakistan not operating against the hakkani has led to the lowering of trust and confidence. to top it off, osama bin laden being found in a military town in the question of negligence. i think it was an absolute case of negligence and not complicity. however, the perception is of complicity, so i do not understand, and therefore the lack of trust. i would like to talk of india- pakistan relations very briefly. there have been confrontationists rife since our
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independence. i was a part of the 1965 and 1971 wars. they suffered an existential threat. there is the strategy of men among occurrence and we quantify this in force levels and maintain that the route. 1974, india was nuclear. the strategy of minutes -- minimum defense and deterrence becomes untenable because now something else is not traduced. -- becomes introduced. we reestablished the strategy of deterrence. the decision was to go nuclear. then the nuclear race starts. in 1998, india decides to
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explore the device again. it upsets the balance again. there are doubts whether the government of pakistan is nuclear or not. we proved to the world, and india, that we are nuclear. that was how the whole nuclear issue got introduced, the desire for nuclear weapons. other people in india said that i was a soldier, a general, a dictator, so how was i for peace talks i am a man of war, indeed. i have fought wars, but i am a man for peace because i know the ravages of war may be better than any of them.
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therefore, i believed in peace in the region very strongly. we were moving forward towards a resolution in india and we were almost on the level and at the point of drafting an agreement. i am very glad my foreign secretary is here, because he knows. he was involved. we were moving ahead, but unfortunately, we let that fleeting moment slip, and i personally feel there are three qualities required on both sides when you're trying to reach an agreement. firstly, the quality and sincerity from your head and heart, whether you want to solve the issue of the dispute for the sake of the country and many reasons. secondly, the flexibility of
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trying to accommodate each other's points of views. i think these two qualities were there in me and the prime minister, also. i saw sincerity and flexibility in him, but the third quality is when you reach a deal that you need to meet halfway and there needs to be a give-and-take. but the the parties have to give something to get something. that is where they get scared because there will be agitation in their backyard. there are extremists in both countries. it is unfortunate that what you have to grasp fleeting opportunities if you are not fast enough, fleeting opportunities do not last forever. it is unfortunate that we missed
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a tree the opportunity and we are now back to square one as far as pakistan and india is concerned. we're trying to restart that now, i think. finally, what is the way ahead? these are the realities that exist. what is the way ahead? united states and pakistan must restore trust. a confrontation would be most unwise. how to do that is the question. on the pakistan side, i believe we must convince the world and the united states about the issue of osama bin laden was not complicity. it was negligence of a very monumental order. also like pakistan is not acting against the hakkani group which
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is causing a lot of anxiety in the united states. the united states must show concern to our sensitivities. the violation of our sovereignty, the indiscriminate drone attacks, causing damage to women and children and also the attitude toward our nuclear capability. they suggest that we should understand nuclear capability because of its threat. therefore, the right to defend ourselves and have the
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capability in the conventional and unconventional is our right, should not be looked negatively at. then, resolving the kashmir dispute is essential, because extremism in pakistan and terrorism is also because of this the job had been -- because of this group recruiting people and sending them into kashmir. we must resolve this dispute. i do not see anyone, any leader visiting india now or in the past telling india we're going to resolve this dispute, even a word on that. ar l from india, one does her some advice to pakistan.
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they also say with all frankness and directness that i know that india is trying to create an anti-pakistan and afghanistan. this must not be allowed. because then pakistan has to fend for itself. pakistan has to value this. i fear that all intelligence, diplomat, security people go for training to india. despite all my offers all along for free training in pakistan,
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not one came to pakistan. then of course, internally, pakistan ladies and gentleman has to be against extremism in our society other than terrorism, al qaeda, taliban. extremism in our society. stop the use and promotion of militancy from mosques of pakistan. stop publications, handbills, posters, pamphlets, urging people towards militancy, extremism. ban publications. ben distribution and selling. -- and distribution and selling. turkey has banned all promotion
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of extremism of terrorism at home and and abroad. lastly, eve of a strategy to mainstream -- evolve a strategy to mainstream the taliban. lastly, on a tactical issue, maybe the pakistan army has been overstretched. the better way of dealing, i personally think, is through a second line reinforcement. we need to equip them with tanks and guns, make them strong enough. because they are ethnically the same as the travel agency, they would be more able to deal with
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terrorism than the pakistan army, which is taken to be an alien army because they are dominated by people from elsewhere. to conclude, ladies and gentlemen, it is easier said than done, what ever i have said. there is tremendous complexity and all i have said. pakistan needs a strong government that understands the magnitude of the task involved, has the following of the people of pakistan, and also shows courage and resolve to change. that is the first assignment in pakistan itself. presently, there is a leadership vacuum in pakistan. no leader, and neither of the two current political parties, i
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personally feel, is capable of helping pakistan. if pakistan is to break the political status quo and come in with another political alternative, the solution lies in a political dispensation that breaks the status quo. therefore, all eyes are on the 2013 elections. we have to break the political status quo, otherwise, i am afraid and i suspect that conditions and pakistan may carry on going as they are going. the next election is going to be the mother of all elections. [laughter]
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press is very much, ladies and gentlemen. -- thank you very much, ladies and gentleman. [applause] >> thank you very much, mr. president, for a very frank and forceful presentation and for sharing your considerable experience with us today. we have not only this room completely filled but also people in several other rooms. let me assure those that are not physically here that you will have an opportunity to right questions and send them to me, and i will be calling on some of you to ask questions as well. before we move to the q and a part of our program, i want to acknowledge that there is at least one former ambassador to pakistan here in the room today. i do not see others.
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i hope i have not ignored anyone else, but if i have, welcome to you as well. advantage oftake ownership of the microphone to ask the first question. all of us have wished we could do do-overs, reverse the decision we've made or change an action we have taken to follow a course other than the one we chose. what are your do overs? what actions did you take, what decisions did you make that with the benefit of hindsight you wish you could do differently? >> i governed pakistan for eight
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or nine years. i know is not my duty as a leader was towards the welfare -- i always thought my duty as a leader was towards the welfare of the people. and may i say that pakistan was on the rise. pakistan performed admirably. in 2006, we were one of the next 11 economically vibrant countries of the world. each socioeconomic indicator both for the people and the state was positive. when i left in 2008, all indications are positive. i did not leave with pakistan on the downside. i left with pakistan on a growth path.
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if i have to come back, i do not have to reinvent the wheel. whenever i did, i need to repeat, because pakistan is headed again toward a failure or defaulted state. however, one has to see reality. what happened? it was not the socio-economic downturn of pakistan, but my popularity, which was about 84% in 2007, for seven years, took a downside in 2008, because of certain elements, because of my moving against the judiciary. i will not go into the details, but i to a constitutional and legal action in that respect.
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it led to politicization and street protests. it led to people coming back to pakistan. it led to her getting assassinated. it led to the overthrow of my supporters and me in favor of the current government of pakistan. my regret, which i do not know if anyone knows -- the deal that i struck with benazir bhutto, in exchange for her not coming before the election, the corruption case against her and her husband, allowing that to be set aside through something called nro. that is my regret because it led
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to a lot of my popularity going down and a lot -- within pakistan -- a lot of anti- feelings. that is my regret. but now we're in a political climate -- because i know what pakistan is going through -- and i feel the people there are not being able to manage. therefore, i consider whether i will be able to play a role. and may i say with the poor performance of the government and the other party, my standing is again, interestingly, it is going up again. therefore, i thought maybe trying in changing pakistan to the better is better than not trying at all. therefore, i will go back to pakistan. i have already announced that i
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will go back on march 23rd, 2012. >> thank you for putting many issues on the table. i know there are many questions. you said that the issue of negligence vs complicity with respect to osama bin ladin is something you would entertain as the subject of a question. here it is. most people believe that the complex was built and he moved in while you were president of pakistan. it is obviously yet unclear who knew about that and whether there was, as you said, negligence or complicity, but it is fair to speculate that local officials knew about it because there must have been some permitting and some knowledge that this larger than any other complex was being built in the midst of this military garrison.
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so my question to you is, as president, looking back on your presidency in 2005-2006, do you bear any responsibility for either the negligence or the complicity that went on when osama bin ladin moved to abbottabad? >> thank you. whether anyone believes it or not, let me say unequivocally, i did not know. you say he was there for five years. part of that five years was during my time. i can confidently say there was no complicity because i was very sure of one thing. i did not know. whether anyone believes that not. if i knew, first of all, your point of building, constructing there were hundreds of
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houses all over available to put him in. secondly, if he was to be put there, would there not be sungard, some security that he does not leave the place, such a valuable target, such a valuable personality? shouldn't one use that as a bargaining chip? there was nobody around. he could move in and out. he moved in the vicinity in the months, ise for believe. how could c.i.a. open a safe house and be watching osama bin ladin without isi knowing?
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knew, they would have whisked him away, if there was any complicity. there is no logic at all. abbottabad has about 800,000 people. when we sit here and listen to, a garrison town, it is an open town. the route to northern india is through abbottabad. everyone is going through abbottabad. the military and civilian people are intermingled. there are many institutions. and this house, frankly, i have not seen it in person, but i have seen it on television. you might find it large or odd. i do not find it odd at all.
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what is so odd about the house? it is a normal, slightly on the large size house. i do not think it has very high walls. other people have very high walls. this is their custom. i do not find this house to be in. people sitting here -- because ls aroundt have wal your house. in all fairness, there was no complicity. there was allegiance of the highest order. is it possible that the army was hiding it from me? nope. 100 times, not at all, not possible. i am from the army.
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they are my people. if at all i thought there were some directions to protect or hide osama bin ladin and not tell me, the second or third tier would have told me because maybe i fought in wars or action with them. maybe they were my students. maybe they served under me. they were all with me. how is it possible that they would not tell me? it is not possible at all. therefore, i think there was no complicity. because i think if we carry on on this path that there was complicity, this is very, very serious indeed. i think the united states has all the right to be against pakistan if it ultimately comes to believe the genuinely people were hiding him. people or complicity. people were cheating.
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and do not think that is the case. and that must be understood because that is the starting point of re-establishing some sort of trust and confidence in each other. >> we have lots of questions. i would like to ask someone with the microphone to come down to the front, but i'm going to ask first of all a question that was sent to us from one of the other rooms. please describe pakistan's close economic and political relationship with china. does pakistan view china as playing a positive role in south asia? does the united states have any reason to be concerned about pakistan's ties with beijing? >> pakistan has always had very good relations with china. pakistan certainly has economic relationships with china. chinese investment in pakistan.
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pakistan goes the economy can certainly benefit through relations with -- pakistan's economy can certainly benefit through relations with china, and therefore it has. but may i say, whether it should concern the united states, i think in this world want us to see diplomatic relations on a bilateral basis. should the united states interests or association, cooperation with india, bother pakistan? yes, it should, if it is going against pakistan's interests with the united states. i think dealings between countries ought to be seen on a bilateral basis. pakistan should not be concerned about u.s.-india relations as long as u.s.-pakistan relations are normal. united states should not bother
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about china-pakistan relations as long as pakistan-united states relations are normal. i think the pakistan certainly -- and every country in the world -- i do not think there is any love affair that goes on between two countries. they're always national interests. every country has national interests which are personal to it. you formulate your foreign- policy through those national interests and you act accordingly. pakistan's national interest certainly is to remain very good relations with the united states and also with china. >> dennis cook from the woodrow wilson center. i wonder if he would not mind elaborating someone on your initiative on kashmir.
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the figure foreign minister said you were just words away, practically, from an agreement. i wonder if you would not mind telling us what roughly you had in mind or you have in mind for an agreement, what do you think would be possible? >> i take pride in the fact the reformulated -- that we formulated an agreement. i would like to elaborate on the parameters. number one, there's to be graduated demilitarization from the line of control and also from -- line of control from the cities where citizens are being harassed because of military presence. next, having some kind of overwatch mechanism of indians,
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pakastani, and kashmiris. lastly, the line of control, which is the main bone of contention. while india would like to have the line of control as near the permanent order -- permanent border, pakistan considers the line of control to be the conflict. that is why we fought the war. my idea was to make the line of control irrelevant by opening as many sites as possible. i had identified six. open trade, open free movement of people, make the line of control irrelevant. these are the broad parameters which we thought could be tested for maybe 15 years, and
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then we would review it and analyze whether the agreement was going well and maybe carry out some modification and adjustments to further fine- tune the agreement. those were the broad parameters, and i think we will drafted along these lines. -- draft it along these lines. >> let's see if we can squeeze in one last question. come to the microphone. >> don crane. acclaim often made in the u.s. media is that -- a claim often made in the u.s. media is that there elements isi that are sympathetic to -- elements in the isi that is a bathetic to religious extremists.
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if that is true, -- that are sympathetic to religious extremist. if that is true, why cannot make the necessary reforms? >> within the army, people come from all segments of the society, from all over pakistan, all provinces. they are affected by the environment from which they come. however, when they join the army, their training in the discipline that they come under, i personally think they fall in line with directions, policies of the top. it is a very disciplined army. now, i cannot rule out the possibility of any element having sympathies toward the taliban or al-qaeda, but i'm very sure that if such an
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element is found disturbing the environment, they are dealt with very strongly. we have a very strong code of military law. i am very sure that the policy we have to be more concerned with the intention of, the policy, the strategy, at the top sure theand i'm very strategy is to defeat terrorism and extremism. and even the people of pakistan, from whatever area they're coming, they are fed up with the bomb blasts. almost 40,000 people have been killed. who is killing them? who is doing the bomb blasts? almost about 4000 people of army men have been killed. who'll is killing them? who are they fighting?
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they're fighting taliban and al qaeda. it is the same taliban and al- qaeda who are carrying out the bomb blasts. people are fed up and people are against them. i personally feel that while i cannot rule out for sure that there is not one element who may be sympathetic to the taliban, i am very sure that the general direction of the military is very positive. and also, may i say, people get posted and they get posted out. in my time rotated officers twice in eight years. we have been dealing with the taliban since 1979.
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a new situation came where pakistan had to fend for itself. who should we be supporting? we had our own strategy and policy. then came 9/11, and the taliban is the enemy. we have been readjusting according to the policy of the country. we must give credit to them for adjusting, readjusting, and again readjusting the attitudes of the people. i do not think one should suspect isi. one should sympathize, help and sympathize. in the entire army, maybe there is folly in some. help in identifying them. do not believe the rule is the
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exception. >> unfortunately, we're out of time. we have to wrap this up. before we adjourn, i would like to make two brief announcements. all of you are here today because you have a keen interest in pakistan and afghanistan and u.s.-pakistan relations, so i would like to take this opportunity to invite you back here next wednesday when we will have a book launch for a new book by a former pakistan scholar and pakistan former secretary. he has just in the last week or so published a brand new book on these same topics. this is next wednesday, july 27th, at 4:00 p.m. we welcome you to join us for that event. the second and last announcement i would make is, because president moshe rarif and his py need to get out of here quickly,
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if you could remain in your seats until they exit the auditorium, we would appreciate that. now, will you join me in thanking the president for his comments. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]
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>> it is and all civil war weekend on american history tv. we mark the anniversary of the battle of bull run, the first battle of the civil war. hear from top historians from 11:00 a.m.-4:00 p.m. eastern on sunday. here is a preview. >> we're standing in a place we called chin ridge. it is the form of benjamin -- farm of benjamin chen. the confederates were disorganized that day as the federal had been by their defeat in the battlefield. it takes some time for the confederates to begin to mount a pursuit. by that time, many of the federal had begun to clear the
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battlefield, across bull run, and head back toward their camps. beauregard would send various units out, units that still had some cohesion and organization about them. he sent them out to pursue -- calgary north toward the church. they became so laden with those they had captured, with so many prisoners, that they could not carry their pursuit very far. he also sent them east toward the stone bridge. they would also make an effort as theye the federal's made their way back. as the confederates continued to make these fleeting efforts to from thee federal's
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battlefield, they would eventually gain the high ground to the west, where a significant part of the army was crossing. while they were in the act of crossing and narrow wooden suspension bridge, the confederates were able to fire upon that bridge, causing a wagon to overturn, which blocked the bridge and created great who were the federalis trapped on the western side. at that point, the retreat became an all-out ground. men streamed across the far side of the valley and went into the waiting arms of the civilians who had come out to watch the action.
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there was quite a bit of chaos here at the close of battle that would characterize that evening. of course, the federal high command was unable to stop this withdrawal from the battlefield. they were unable to stabilize the lines. instead, the retreat continued across fairfax county, across the same route and road, the same major roads that the army had taken out from washington, and the march that had taken the men two days to get out to the city was made in reverse in the day. by the next day, the federal's were streaming back into the capital city, and the campaign had been a disaster. it was an embarrassment for the lincoln and ministration.
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-- administration. >> the all civil war weekend on american history tv is live at 11:00 a.m. eastern tomorrow on c-span-3. >> on tuesday, the senate banking committee looked at the proposed work and structure of the new consumer financial protection bureau. the bureau was created as part of the dodd-frank financial regulation law that president obama signed a year ago this week. witnesses include the center for the -- the head of the center for responsible lending and the american bankers association. on thursday, the house approved some changes to the new bureau. those changes would have to be approved by the senate and the president has threatened to veto any changes. a south dakota democrat chairs this hearing which is just under two hours.
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>> mr. marcus schaefer is the president and ceo of a federal credit union located in north carolina with the mission of improving the financial lives of its members. we have the president and ceo of sprint bank based out of oklahoma. he is also the chairman of the american bankers association. miss lynn drysdale is an
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attorney in florida, representing consumers, including service members, who have been harmed by financial institutions. we have a partner from a law firm representing the u.s. chamber of commerce. he specializes in bankruptcy, commercial law, and financial regulation. please welcome all of you here today and thank you for your time. mr. callahan, you may proceed.
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>> the center for responsible lending works to help families achieve financial success. we have provided home financing to more than 64,000 families, along with a charter school financing, small business loans, and other community development financing. as we approach this anniversary of the wall street reform act, it is important to remember how we came to this point. borrowers were placed in loans they had no reasonable chance to repay. one of those borrowers came to us, a retiree on social security benefits. he was placed on a loan with a deep teaser rate. after the loan adjusted, the required payments exceeded his entire take-home income. notably, the mortgage broker and the lender received large bonuses for originating this loan. unfortunately, that loan was all too typical.
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wall street in turn stoked the demand for these loans and created so much demand for the loans that they had to create synthetic securities because there were not enough loans to satisfied the demand for securities backed directly by these loans. this further leveraging of the loans plunged the country into crisis when the securities collapsed under the weakness of the underlying loans. importantly, when you compare the experience of the u.s. to other countries, no other country had such poor quality mortgages. other countries experienced similar reductions in home values, because their loans for more sustainable, they incurred much less harm than the u.s. economy. another lesson from the crisis was that a single company or group of companies cannot stop predatory practices. indeed, some tried in the by not --il andoom,
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mortgage boehmom. the result was they found their market share quickly evaporated as loans were steered to other companies that play by different rules. ultimately, most companies joined in the unsustainable practices. the need for the consumer bureau remains critical as we approached the transfer date. mortgage servicing abuses have been permitted to become epidemic, as financial regulators fail to exercise the necessary oversight. in addition, we're releasing a study this week showing that banking consultants have been peddling at 350% interest loans for programs to be offered out
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of our biggest banks, out of their own offices. the regulators, instead of keeping our flag should institutions out of this modern day loansharking, have let it spread to some of the largest national banks in our country, leaving struggling families trapped in a cycle of high-cost debt. there are proposals to restructure the consumer protection bureau before it opens its doors. there are already safeguards in place. certainly, with small businesses and financial institutions, they must consider the impact of burdens on companies. however, already hard wired into the existing law is a requirement that the consumer financial bureau consult with and give notice to small companies before they can even issue a proposed rule, a requirement unique among financial regulators.
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finally, the american people know how badly the consumer financial protection bureau is needed. we commissioned a poll this month asking about opinions regarding a consumer agency. the poll showed that new members of all parties overwhelmingly supported a strong consumer agency and were against efforts to repeal it. they also rejected the argument that fair lending is bad for the economy. in summary, america still recovering from the devastation caused by the flood of unsustainable lending. yet today, basic financial transactions for the average family remain unfathomable. anyone who tries to read of mortgage loan agreement or even a credit card agreement has had that experience. they are absent basic ground rules. those deficiencies hamper the operation of our free markets
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and put our economy at risk. cfpb should be allowed to begin its overdue work. thank you and i look forward to answering your questions. >> thank you. mr. shaffer, you may proceed. >> the federal credit union appreciates the opportunity for input into public policy dialogue regarding enhanced consumer protection. we thank you for having us here today. our mission is to enhance the quality of life of our members and to become their preferred financial institution. we offer a full range of financial services including savings, checking, certificates, money markets, iras, and rainy day savings. loan services include home, auto and credit card. we provide state of the art home
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banking, electronic bill payment and remote deposit. we offer financial planning and a positive also buying service. we can offer lower loan rates, higher savings rates, low and often no fees as we help members execute financial plans for their future. central to all of our services is our emphasis on financial literacy and counseling to our members and for our communities. over 55% of our member households earn less than $45,000 annually. access and delivery is key to our mission. we maintain an overarching commitment to improving our members' lives by understanding and meeting their financial needs. this translates into our service culture. our staff engages customers to bring about real change and the long-term objectives rather than the traditional sales approach so prevalent in modern banking.
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low interest rates have allowed us to reposition hundreds of members into lower-cost mortgages and car loans. we believe the consumer should be aware, not be where. -- beware. we cannot solve our credit card accounts to large card issuers. we have not dropped courtesy overdraft protection. we do not allow indirect auto dealers to mark a power rates. we help our member owners become debt free on their primary home by retirement. we support public policy that informs and educates the consumer on financial decisions while improving personal balance sheets. our experience is that consumers have been needlessly financially disadvantaged by a history of questionable practices and procedures such as paid
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overdraft protection, extending credit that terms are words could not meet, overly complex disclosure materials and other practices. these seem to be acceptable got just rather than a disservice -- gotchas rather than a disservice. even with the reforms like the card act and the consumer protection initiatives, it makes sense to have a regulator focus on consumer protection. clearly, controlling practices such as unregulated mortgage brokers who in some cases were able to lure members into products that did not improve their financial lives as needed -- we know that in north carolina we had to extend services there.
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i have observed that many national tax preparers continue to offer high-priced tax refund and participation loans. a consumer agency would address these practices directly or through a national initiative to improve financial literacy for consumers of varying degrees of education and experience. we all want our children to make better decisions for themselves. we should support clear language and presentation like what is required of credit-card disclosures. regulators should be mindful of the impact of massive of mentation of regulation on smaller financial institutions, particularly credit unions, or the cooperative structure has historical a -- queried the cooperative structure has historically resulted -- where the corporate structure has historically resulted in pro- consumer practices.
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there may be unintended consequences to consumer- friendly financial institutions as bad actors are reined in in a one size fits all implementation. staff time required to explain language mandated by the fed could have gone to advising our members on how to better build their financial foundations. we support streamlining and simplifying existing overlapping regulation to improve consumer understanding reducing costs to the financial institutions that could be passed on to the member-owner. streamlining and the fair credit reporting act could have similar benefits. we support financial services that are helpful to the consumer. the regulator will need to carefully balanced deliverable.
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consumer protection is not a one time fix but an ongoing effort that will span different political landscapes. we support a structure that will not make the regulator in a factual, but also not allow for policy to become overly- politicized. i welcome your questions and discussion on this matter. >> thank you. mr. kelly, you may proceed. >> thank you. thank you for the opportunity to testify today. my name is albert kelly. i'm from spirit bank in northeast oklahoma. we run a bank has offices in 10 cities and towns in the northeast part of the state. the banking industry fully supports effective consumer protection. we are proud of our 95 years of service to our customers build on their treatment of those customers. no can be successful without a
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long-term perspective like ours and without treating customers fairly. the new bureau will certainly impose new obligations on bank's large and small that have nothing to do with the financial crisis and already have a long history of serving consumers fairly in a competitive environment. therefore, there are several features of the bureau that make improved accountability imperative. these include the problems brought about by the extensive new powers of the agency, the unfettered authority of the director to impose new rules, the separation of consumer protection from bank safety and soundness, the gaps in regulating non-banks, and the authority of regulators and states attorney general. for all these reasons and others, it is our first priority to improve the accountability of the bureau. establishing accountability supersedes other important priorities regarding the bureau, including ensuring appropriate bank like supervision of non-
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banks for consumer protection. we support the creation of a board or commission that would be responsible for the bureau's actions, rather than giving the head of the bureau of sole authority to make decisions that could fundamentally alter the financial choices available to customers. it also provides a needed balance and appropriate checks and the exercise of the beer as significant authority. we urge the congress to pass of the bureau's significant -- significant authority. we urge the congress to consider this. if we are to hold the bureau accountable, we must also hold accountable all those who derive authority from its existence. we support a simple majority vote of a financial stability of oversight council to set aside
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of your role, instead of a two- thirds vote. if the majority of the nation's -- set aside a bureau rule, instead of a two-thirds vote. if the majority of the nation's financial leaders believe the review is 9 -- believe the rule is not good, that should be enough. for example, bureau actions that end up driving some community banks out of business would not rise to the level of systemic risk, but have enormous implications for the communities they serve. once the goal of accountability is achieved, we believe the bureau should direct its resources to the gap and regulatory oversight. a failure to supervise non-bank lenders exists.
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as we have since our beginnings, banks across the country will continue to do what ever we can to make sure that our customers understand the terms of the loans they are taking on. our path is made more difficult by the many new hurdles we have to jump over to serve our customers' most basic needs. already, they're 2700 pages of proposed regulations, and this is before the bureau undertakes any new changes. the result in higher cost, restriction on sources of income, limits on new sources of capital, and excessive regulatory pressure. all make it harder to meet the needs of our communities. these impediments inevitably reduce the credit they can be provided and the cost of credit that is supplied. your loans mean fewer jobs. since banks in communities grow together -- fewer loans mean
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fewer jobs. since banks and communities grow together, the limits of one, limit the other. thank you. >> thank you. miss drysdale, you may proceed. >> thank you. members of the committee, i appreciate the opportunity to speak today. i have been a legal service attorney representing low-income consumers for the last 23 years in jacksonville, florida. as some of you may know, we are proud to be the home of two major military bases, so i have had the honor of serving military clients in my tenure there. the group of low income individuals has grown exponentially during the
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financial crisis. as this demographic rose, also has ground the amount of aggressive and harmful lending -- grown the amount of aggressive and harmful lending which has gone unregulated or under-regulated throughout the united states. one of the most of vulnerable populations are the service members who are serving our country. many years ago, congress passed the military lending act. this committee also was in favor of that act. this act was meant to curb illegal and harmful products that were hijacking service members bank accounts and taking their automobiles while they were serving our country overseas, leaving them with low morale, harming military readiness, and certainly harming their families at home. despite the passage of the
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military lending act, which among other things reduced the interest rates that could be charged for military members and their families, and also prohibits mandatory unilateral arbitration, one of the individuals i spoke of, when i spoke at the hearing in 2006, was an air traffic controller. he was having to monitor the air waves -- airways well at the same time being called and threatened with court martial and imprisonment for paying back pay loans even though he had already paid back $10,000. despite the protections of the military lending act and despite the prohibitions of the federal fair debt collection act, he was still getting these threats. he was in danger of losing his security interest as well as his job. the military lending act capped interest rates and prohibited unlawful terms, but we're still
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seeing these loans with triple or four digit interest rates being provided to service members as well as many american citizens. this is happening because these lenders are operating under the guise of the internet. they're able to charge interest rates that are in excess of those allowed by the military lending act and state law and engage in other illegal practices such as requiring the assignment of wages as a condition of obtaining a loan. this is also in violation of federal trade commission regulations. one may wonder why someone would take out a loan with triple digit or four digit interest rates. that is because these loan products are packaged in a manner that is deceptive. the interest rates are not provided up front or their understated. for example, another client of mine took out a 20 two hundred
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dollar automobile title loan secured by his -- a $2200 automobile tire loan secured by his free and clear title to his of a mobile -- tight a loan secured by his free and clear title of his automobile. the stated rate was 24%, but the real interest rate was above triple digits. he ended up losing his home. another very disturbing trend in providing unregulated loans are loans provided to military veterans who are not covered by the military lending act. these veterans are being enticed with ads, with lines with military names in the name of the loan company, and there led to believe that these companies are sanctioned by the military, when instead they're taking their pensions with loans of interest rates of triple digits.
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these types of loans are completely unregulated. just as i have -- i know you have heard many hours of testimony relating to the problems with the mortgage industry, but i did want to bring up just a couple of instances where i have had clients who were fighting insurgents in afghanistan. at the same time there were fighting wells fargo on the mainland because wells fargo would refuse to accept their allotment payments even though they were current. i receive e-mail messages from your singapore from a gentleman with top-secret clearance who was current on his mortgage and still being turned over to an attorney to proceed with mortgage foreclosure proceedings. this tournament essentially was going to lose his home in dig this gentlemen sm -- this gentle men eventually was going to lose
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his home because he could not handle the stress. this automatically is going to affect the morale of the military service. the military landing and does not at all protect our veterans and it also -- lending act does not at all protect our veterans and it also does not protect other citizens who should be protected by these unregulated or under-regulated, aggressively marketed, high-interest you. >> thank you, ms. drysdale. mr. pincus, you may proceed. >> it is an honor to testify. the chamber supports consumer protection regulations that punishes fraud and requires consumers receive accurate
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disclosures about financial products. businesses and consumers benefit from a marketplace that is free of fraud and other excessive practices. consumer protection regulations must avoid on justify regulatory burdens. those burdens harm all americans by averting resources essential for economic growth and preventing businesses from getting the funding they need. the bureau's the unique and unprecedented structure deviates from the fundamental principles of accountability and checks and balances that have been a basic feature of our federal government for the past 244 years. the bureau has unchecked power far beyond that wielded by any
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other federal regulator or individual in business. the bureau lacks the checks in short in providing accountability. all agencies are subject to at least one of these checks. there are none here. first of all, in contrast to the familiar commission structure that is the norm for the fcc and the ftc and other agencies, the director exercises sold decisionmaking authority. -- sole decision making authority. most governmental officials served at the pressure -- the pleasure of the president. in other agencies, the power to appoint deputies and other officials is reserved either to
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be president or is subject to the president's authority. the director has the power to appoint every one of the agency's employees. the director has the ability to spend more than $500 million without congressional approval. there is no other regulator or private sector activity that enjoys such authority. the director can appoint all subordinates and this renders the position even more anonymous. -- anomalous. the director has the power to
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appoint a comptroller's deputy. this is a different situation. there are claims to substitute for the regulations present in other agency and not present here. those contentions are wrong. there is a budget cap in that dodd-frank set a cap of $150 billion. every agency has a budget caps set by its authorization legislation and its appropriations legislation. that is no different. every agency is subject to an audit by the gao or the inspector general. there is a view by the financial stability oversight council. if the bureau were a private entity, that statement could be the subject of an enforcement action for a deceptive practice. the review applies only to
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rules. the process seems to have been designed never to be triggered. it has a high standard. it has to be a threat to the entire u.s. financial system. seven of nine votes have to be in favor of overturning the rule. also calls is the contention that a multi-member commission would provide more consumer protection. i do not think anyone would say that the federal trade commission is not a bigger is regulated. the model proposed by the president for this agency and approved by house of representatives -- i do not think anyone would say that the president or the house of representatives was interested in getting the power of consumer protection.
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the chamber believes that unless the bureau's laws are remedied now, the abuse will worsen and spread and harm consumers and our entire economy. thank you again. i look forward to your questions. >> thank you, mr. pincus. mr. levitin, you may proceed. >> i am a professor of law at columbia university. what theseear about bills are about. they are attempts to hobble the agency under the banner of accountability and oversight. there are concerns about oversight before the cfpb is operational. nothing they have done raises concerns about the existing oversight structure. it has only received accolades
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from financial institutions and consumer advocates. concerns about oversight would be better directed to other banking institutions that failed in their safety and soundness issues preceding the financial crisis. people have shown no interest in more oversight to prevent the crisis from occurring. the cfpb is more accountable than at any other federal by a regulator. i have a chart that shows the oversight compared to other federal agencies. it differs somewhat from mr. pincus's characterization. in particular, i would note that it is not clear whether the president has the ability to remove the comptroller at well or if it is only for cause --
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at will, or if it is only for cause. that is the opinion of the general counsel in one part of the treasury department. that is not united states code. if you look at the chart, it shows that there is extensive and unprecedented oversight at the cfpb. accountability does different -- differ from other banking regulators. their oversight structures have not worked. to review the key cfpb oversight provisions, they are subject to rule-making and adjudication provisions. it is one of only three federal regulators that are subject to federal review. they have numerous statutory limitations. they must make detailed findings
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if they want to exercise the power to declare certain acts unfair, deceptive, or abusive. the cfpb is the only federal bank regulator subject to a budgetary cap. some think the cap is too high. i have never heard similar complaints about be said for the fdic. -- about the fed or the fdic. the cfpb is the only federal bank regulator whose actions are subject to the financial oversight council. the cfpb is subject to moral persuasion by the industry. it is subject to oversight by congress. there have been numerous
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hearings about the cfpb and it is not open for business. no other federal regulator is subject to constant oversight limitation on its actions. one would subject the cfpb to the appropriations process. doing so would be a serious mistake. consumer financial protection is too important to politicize it through the appropriations process. do we want the level of consumer protection we get to be the result of political horse trades? no other federal bank regulator is subject to this appropriations process. a former regulator of fannie mae and freddie mac was subject to appropriations. the gse friends in congress
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yanked on its finding leash. other provisions in the bill replaces a single director with a fine member panel. -- five-member panel. instead of having the buck stopped with one person, authority will be defused over five people. finally, the reform bills would lower the threshold for the financial stability council. bank safety and soundness is a cap -- is a technical term. means profitability. it means a bank can only be safe and sound if it is profitable.
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this means said any cfpb rule- making that affected bank profitability would be inconsistent to safety and soundness and would be subject to a veto. the dodd-frank act reforms the mortgage lending industry. under this, it could not be implemented. congress created the cfpb to help families. let's let it do its job. thank you. >> thank you, professor. thank you all for your testimony. we will begin asking questions of our witnesses. will the clerk said five members on the clock for each member for their questions. ms. drysdale, in your testimony, you talk about the scams service members are tricked into.
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the cfpb has an office dedicated to service members and designed to help them. what are the benefits your clients will get from this office? >> i think mrs. petraeus' will be effective in providing service members with an address when they have problems. it will be one agency that will take on consumer complaints and tried to address consumer complaints. by recognizing systemic problems that need to be addressed -- one of the clearest examples of her effective ness was her actions -- effectiveness was her actions in making sure foreclosure notices were given to active
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duty military. active duty individuals were losing their homes without proper notice and without the protection of the civil relief act. she took notice of this. there were enforcement actions taken against three of the servicers that were the most at fault in the failure to provide notice. i am sure there are others out there. i am feel comfortable that the office of service member affairs will be the most effective vehicle to do this. >> without a director in place, the cfpb will not be able to exercise its examination and enforcement powers over financial institutions. do you agree that this authority is essential to level the playing field between small community banks and credit
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unions that will not be examined by the cfpb? >> we agree that the sooner the cfpb can get to the task of monitoring and regulating the non-bank participants, the better. we recognize this is an arduous and political process now. we would love to see a cfpb that is not subject to politics in terms of not knowing. like any business, we like it to be predictable what we will be subject to. certainly, the sooner the better in terms of being able to regulate payday lenders, the folks that do tax anticipation refund loans. we would like to see some leveling of the playing field. >> professor, there seems to be
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much misinformation about the accountability of the cfpb and the checks and balances impose on that agency. would you please set the record straight about this issue? >> the cfpb has a unique set of oversight and accountability provisions. it does not look like any other federal bank regulator in this regard. we have seen that the oversight has not worked well for other federal bank regulators. the other regulators allowed the federal banking crisis to occur. the cfpb is subject to a budget gap. no other federal bank regulator is subject to a budget gap. the cfpb is subject to a veto. no other federal bank regulator
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can be vetoed by other regulators. the cfpb is subject to a standard set up oversight provisions. it is subject to the administrative procedures act, makingoverns rulee and procedures. the cfpb is subject to the small business review. no other federal bank regulator is subject to that. there is a mandatory g.a.o. audit that happens every year. mr. pincus's characterization that g.a.o. audits are routine is not correct. it is also important to note
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that the cfpb is subject to the inspector general. there may not be a dedicated cfpb inspector general, but the sea of the -- but the cfpb has inspection. >> can you explain how the cfpb will be tempered by regulations? >> we have the financial stability oversight council. it has the ability to veto rule- makings that damage the systemic stability of the u.s. economy. that is a critical oversight. if the occ or to take an action that endangered systemic stability, no other regulator would have a say in that.
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the coordinate with other regulators in rule-makings. it has already shown an extreme willingness to listen to other regulators, to listen to consumer advocates, and to listen to financial institutions. this is not an agency looking to be one-sided. it has already shown that it is trying to find the right balance between consumer protection and ensuring that we do not have too many restrictions on business. >> senator shall be. -- senator shelby. >> thank you, mr. chairman. the professor notes that if the bureau opens without a director, the bureau will not have all of its powers, including the authority to regulate non-banks.
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some say the director should be installed immediately to ensure that banks and non-banks are regulated similarly. what is the position on the need to immediately confirm a director? >> the american bankers association position has been the same since the introduction of the cfpb. it is a matter of governance. we believe they should have an oversight board or a commission that allows that director to report to it. that has been our position. that is the sound way to roll this out. no one will stand in favor of having any consumer damaged or having the egregious nature ms. drysdale discussed. we believe this needs to be got in right the first time. it is not a matter of us not
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saying go ahead. it is a matter of us saying we believe this structure is the proper structure for this agency. >> it is all about accountability. in your testimony, you state that the bureau's you need and unprecedented structure deviate radically from the fundamental principles of accountability and checks and balances that have been a basic feature of our federal government for the past 224 years. in the testimony by the present -- by the professor, he says the bureau is more accountable than any other financial regulator. on what specific point to you disagree with the professor's analysis? >> i think i disagree with all of it. what is critical in looking at
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accountability is, what is the purpose of these checks and balances? the critical thing about the four checks and balances that i mentioned is that they have been present in every agency that has been created except one. presidential power of either oversight or appointment of subordinates. they ensure oversight and some control by the political branches. what is critical here is not just checks and balances. it is checks and balances so that this exercise of government power answers to the elected officials elected by the people. the absence of many of those means there is a critical defect. the director has power, but is not checked by a representative of the people. it lacks each of those four things. turning to the things the
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professor mentioned, they are either common to all agencies, or they do not tie to the people's elective representatives. -- elected representatives. it ties back to some important guarantees. it does not tie back to the people's be elected representatives. he mentions being -- the fsoc review. it does not apply to enforcement actions. the director has total authority over enforcement actions. the people setting up the bureau say they plan to pursue enforcement actions rather than regulations. even if there were regulation, the standard, as mr. kelly mentioned, threatening the stability of the entire
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financial system -- shouldn't we be concerned about a regulation that can threaten the stability of the entire financial system? this is a reduced set up never to be used. congressional over -- this is a review set up never to be used. they have had trouble getting information about how the bureau intends to spend money. the review authority is in the statute. but it only applies to rule- making, not to statutory provisions. there is no check on the director's decisions. the director gets to decide. that is different from the office of management and budget. omb represents the president who
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can ensure of agencies to change their views. -- who can convince agencies to change their views. >> the reality is, when these rules are promulgated and put forth, we have 7500 community banks out there scattered on main street across this country. sometimes i think when we tested by, we talk about things about reduce standards. none of those banks are ever going to rise to systemic risk. those banks get up every day in your community and mine. they get up every day with the intent of trying to serve their
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customers and do the things they have done for years. we are saying this needs to have a board. it can become on weekly -- unweildly. it is difficult for them to take on the burden of dodd-frank in the manner it is going to be promulgated because there is a massive amount of regulation. we will comply. the fact of the matter is, this review is far from abroad. >> do you believe dodd-frank is going to help us create jobs in this country? >> senator, i would say that from the standpoint of the banking industry, it is doing quite the opposite. i can cite an example after example. i was thinking the other day that today, i can think of 1000
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jobs that we have funded. if that loan came in, we would not take it to the committee. it requires there to be imagination and creativity and hope. think about that. think about that community and the jobs that will create and what it will build in the economy. quite frankly, most community banks are running their banks to comply with regulations, but not to develop business or try to create jobs for the economy. they are overwhelmed by the regulations they are getting.
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jobs werends of lost before we had this regulation in place. >> the bureau becomes open in a few days. it has been power to regulate these agencies. is that accurate? >> unless there is a director that has been appointed by the president, the treasury secretary becomes the acting director. the treasury secretary will have limited powers as acting director. the treasury secretary will only be able to exercise the powers given the bureau by title 10.
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those powers include enforcing existing federal consumer protection laws. they do not include the power to create any rule-makings under those laws. it does not include the ability to regulate non-banks. >> that is an important clarification of what happens the day the agency stands up. one of the consistent themes here is that we should be applying these standard provisions to all financial agencies. mr. pincus, would you and the chamber support having been federal reserve budget subject to the appropriations process? >> the federal reserve has one check already.
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it is a multi-member commission. there is not a single person that exercises the power. congress did that because depart with the fed has is vast. >> the fed is a multi member commission. what is your opinion on the budget? should it be subject to congress? >> no. we think that history has saw -- has shown that that check is effected. -- is effective. >> how effective has it been? it was not until march of 2009 when they did and forced some regulation with respect to predatory lending.
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as far as consumers are concerned, do you feel that provision structure is effective? >> the chamber said this during the dodd-frank debate. there were failures with respect to the entities that had consumer protection authority. the chamber supported congressional action to remedy those still used. during the run up to the financial crisis, there were failures of regulators to exercise their existing regulatory authority. one question was what was the best way to remedy that. congress decided it was to consolidate that authority in a new regulator. the problem is it is a new regulator that has none of the checks and balances designed to ensure accountability.
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these are the features of our government structure. >> how about the structure of the fcc? lehman brothers and bear stearns. their budget is subject to congressional authorization. do you think they were effective regulators? >> i think the ftc has had some regulatory failures. the chamber said that changes were needed. on the other hand, if you look at the federal trade commission, many people say the federal trade commission has been a successful and effective consumer regulator. if you compare it to the antitrust division, a lot of people will say it has been an effective antitrust regulator. >> i would like to go to mr. levitin.
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you have heard this dialogue. what is your impression? >> mr. pincus is being kind in characterizing the ftc as a consumer protection agency. it is held on a tight leash by congress. if you think back to 1980, the ftc had advertising targeting children as unfair. congress stepped in and choked off the ftc's budget. we see congress itself acting on cigarette ads targeting children. i do not know if that is how we want to do our regulation. the most instructive comparison would be the office of the comptroller of currency. no commission structure.
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the treasury secretary is prohibited from preventing the comptroller from undertaking will making. it is an independent regulator with an independent budget. that is being and a lot for the cfpb. part of creating the cfpb is to be a counterweight to recognize that consumer protection needs to be balanced. it needs to be balanced with parallel agencies. >> follow up on the professor's comments, we have overlooked the most fundamental checks and balances there. that is the constitutional authority of the congress in the normal legislative process. there have been in since these -- instances where regulators
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have taken action and congress revised the structure or rules in the authority of that agency. what concerns us is the history we have had. one of the most recent ones is when the federal reserve proposed modest credit card reform, are less comprehensive than what the senate and the congress enacted. the occ declared those mild reforms as a threat to the safety and soundness of the banking system. it is that the point -- that viewpoint that is going to affect profits that makes us concerned that it will be told the actions of the consumer bureau. >> thank all of you for your
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testimony. i know my friend from rhode island was not suggesting that because people have failed that we should not have any checks and balances in any of these organizations. i know that could not be possible. let me go to you, mr. calhoun. i know that you know that a lot of us try to figure out a way to cause this thing to have some checks and balances. i do not understand. there has been a major victory in having a consumer protection organization. it is going to be well-funded. i do not understand why people tried to press into an ideological divide to save this one entity should have no checks and balances. i would not confirm me as head of this agency.
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it is not an appropriate thing. i would ask you, why is it that we have taken this one issue? there have been some modest request. you have been involved in the creation of this. there have been some modest requests regarding checks and balances. there are going to be democratic appointees to this. there could be some ideological republicans appointed at some point that repeal it. i do not understand why you have done this and why you have -- why you have not been willing to say, maybe we should have some appropriate checks and balances? everybody would be united behind this instead of this continuing to be a political football because of the lack of any kind
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of checks and balances. >> thank you, senator, and all the members on this committee. this is with the rubber meets the road on how we avoid another financial crisis. our experience has been bad -- occ set up whose primary responsibility is safety and soundness. occthe one thing about the ic that you continue to leave out is that a banking institution can choose not to be regulated by the occ. you can be a state-charted industry and not be regulated by the occ.
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>> because of the feature that the bank can choose its charter, the occ is expected to be more pro-bank and anti- consumer. >> why are you using the occ as an example? it is not a good example. >> it will be the continuing primary regulator of the national bank in this country, which control a huge share of consumer transactions. the consumer protection bureau and its director needs to be on par so that you have the two of these working together with comparable structures and comparable power. we agree in a balanced way forward.
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everyone in the agency, in particular, the consumer bureau, is aware that at the end of the day, for them to be sustainable, they have to stay in line with with the congress, with the administration, with the political process is. the ftc, in the 1970's, a step further than the administration and the congress thought it should. they came in and cut back its authority. >> i think you all have needlessly created an issue back create -- created an issue that created a divide. the only way it could pass was with all democrats. the bill ended up being lopsided. we ended up with a tremendous
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lack of clarity and we will have it for several years. i think this was a gross misstep. i think you had the opportunity at one. . senator shelby worked on it. you could have created some checks and balances. we ended up with a financial reform bill that is not what it could have been over this issue. to me, this is a great example of people taking an ideological viewpoint and causing bad legislation. on numbers of fronts to come forward. let me ask a final question. if you knew that the person appointed to this position was going to use this position to run for statewide public office in a few years and told people that, would you believe that would be the right person for
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this job? do you think it should be a politicized shop? job? >> the person should have qualifications. >> there is no accountability. i just want to ask you this question. if someone stated that they wanted to run for governor of a state in 2014, but they were going to do this in the inner around and make a name for themselves -- in the enter around -- in the interim to make a name for themselves, would that disqualify them for this position? >> that would not disqualify them. >> thank you, mr. chairman, for this hearing. i want to welcome the witnesses.
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history has shown that our country has been great. whenever we have been challenged, we have come forth with legislation that has turned our country around. the dodd-frank bill has done that because of the crisis that we face. d. it has been documented that there has been failure of the federal banking regulators to address consumer protection issues. for me, this is what it is all about. ms. drysdale, a 2006 report found that payday landing had a
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negative affect on military readiness -- payday lending had a negative affect on military readiness. the military is particularly vulnerable to predatory lending practices. do you see any gaps in consumer protection for members of the armed forces to ensure that our service members maintain a high level of readiness in defense of our nation? what role can be cfpb -- the cfpb play in addressing these gaps? >> i see large gaps. my testimony attempted to highlight the loopholes that have been created by federal
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regulations adopted after the military lending act was enacted. it allowed payday lenders, title lenders, refund anticipation lenders to create products that put them outside of the military lending act. it allows them to include mandatory, unilateral arbitration in their contracts which prohibits military members from being able to have access to the courts if they do have problems with these deceptive bleed market products. -- deceptively marketed products. it makes it almost impossible to protect the younger service
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members. the military lending act does not apply to automobile financing. one of the first things the many in listed men do when they get their first paycheck is to try to purchase an automobile. the protections provided by the military lending act should be expanded. that trends are covered by the lending act --that iran's -- are not protected by the military lending act. these products are robbing them
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of their vehicles and taking their homes away leaving them and their families without a place to live. >> mr. levitin, in your testimony, you find a trade-off that arises between consumer protection and bank profitability. can you talk more about that tradeoff? what implications should it have on the focus of the cfpb? >> of course. there is a balance that the regulatory structure is trying to strike between bank safety and soundness and consumer protection. bank safety and soundness means bank profitability. a bank that is not profitable is
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not safe and sound. you do not want to put your money in a bank that is losing money. the way the regulatory architecture worked prior to the cfpb was that consumer protection and safety and soundness were entrusted to the same agency. bank profitability ahead of consumer protection. by creating the cfpb and not giving them the safety and soundness irresponsibility, consumer protection can be above bank profitability. as long as they are profitable, there is no public interest. it is simply that they be profitable.
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the banks want to increase their profits. they are concerned that the cfpb will reduce their profitability. as long as the cfpb does not create a systemic risk, i do not think there is any concern. there is no reason congress should be concerned about the level of bank profitability, simply that banks are profitable. the cfpb is allowed to find the right level of consumer protection. >> senator, may i comment on that? >> yes. >> briefly, with respect to the professor, i can assure you that the regulators that come into our banks and banks like ours look closely at compliance with every consumer law and are severe beyond all means if you are not compliant. we spent an enormous amount of
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money trying to comply every day. it is wrong to suggest that any of us would rise to the level of a systemic risk under any system. anything that is done or imposed on us would never be something that would rise to that level. i take respectful exception to that. >> mr. calhoun, we have heard about the federal trade commission being an effective regulator. they are a regulator of mortgage brokers. brokers engage in receiving bonuses for steering families into predatory loans. the lyre loans developed -- liar loans developed and the numbers were fish -- the numbers were fictionalized where was the ftc
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to all of this. ? >> you saw a variety of influences. there were ones that were imposed today by the cfpb that had cut the ftc and would handcuff the consumer bureau. -- handcuff the ftc and would handcuff the consumer bureau. there has been a general challenge with the confirmation process, not just for the cfpb, but across the board. this body has been looking at ways to improve that. the cfpb had authority, but was unable to use it because of the deadlock. the trade commission, excuse me. hud also have authority over mortgage brokers.
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in 1999, they moved to limit kickbacks to put people into loans that blew up the economy. there were writers -- riders put on to prevent that. >> thank you. we had issues like companies creating mo -- creating a remote offices. a whole series of clever actions to run up these -- up fees.
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why did you -- why did the occ prevent regulation of those acts? >> long-term structural problems were allowed to emerge. personal finances were undermined. mortgage products were turned into securities. why was the short-term profitability under the argument of soundness? >> a lot of that has to do with the competition for charters among bank regulators. banks could shop for a regulator. there was a discussion about shopping for charters created a race to the bottom.
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the occ gets its budget from appropriations -- not from the appropriations process but from fees from the banks it tartars. -- it charters. that means less regulation. >> you mentioned the military lending act. who is the regulator for that and how do we fix these loopholes? is a regulator issued? a regulator issue? >> i believe it is a regulator issue.
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there are few products that are actually covered. it is easy for any type of lender, institutional or otherwise, to create a long product that is 92 days rather than 90 days to completely allow it to avoid regulation altogether. the department of defense regulates the military lending act. as you can imagine, the department of defense has a lot of other matters on its mind rather than regulating financial industries. >> thank you. my time has expired. as we look at the details, we find that the death you see - the ftc efforts were stymied.
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dod is limited in their enforcement. there are so many of these issues that ended up being a huge system across -- systemic risks. >> i want to echo the words of my colleagues about the need to regulate the cfpb. we have seen debates over funding for the cfpb. we know most republicans opposed
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the creation of the cfpb. that is just an effort to take away the bureau also feet before it is up and running. the bureau is not funded by taxpayer dollars. it is an irony that the same members of congress to express concern about the debt and deficit want to add the cfpb to be taxpayer's tab. for 10 years i tried to get the fed to do a credit card disclosure. when they looked at this issue, they looked at the lands of safety and soundness, not to protecting consumers. that is why we need an independent board. a recent study by the pew charitable trusts found that half of disclosure statements provided by new customers by the 10 largest banks run at over 111 pages. there were over 49 different
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hidden fees in these disclosure statements. americans are expected to pay $38 billion in overdraft fees. we are not talking about government regulation. we are talking adam smith. disclosure is how the economy is supposed to work. this would show the key terms of any checking account account closing fees and the terms of overdraft fees. i want to as the witnesses if they would support a new disclosure requirements for checking accounts?
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>> it was used with credit cards. it was an important advance. it is particularly needed right now. many banks are adjusting the fees they are charging on checking accounts. it is hard for consumers to move their accounts from one bank to another. they need to know what they are getting into before they get into it. >> now you, mr. shaefer? >> enthusiastically. >> we support disclosure so that the customer understands it clearly. that is fine as long as it does not violate the other things we are mandated to do. the same could be true on mortgages and other things. >> you are supportive of the concept. >> i am not speaking on behalf
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of the a.b.a. >> 111 pages is not simple. >> hours is not 111 pages. it could still be simplified. i believe all of the mortgages -- and we do quite a few of them -- there is too much paperwork mandated by the laws and regulations. the simplification of that would be welcome. . .
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it would allow an apple to apple comparison and it would allow consumers to get the best deals. i would say to always witnesses that when it went into he effect it brought interest rates down because there was real competition and many people propose a cap on credit card interest rates. i'm sure mr. kell buy and mr. bink cuss wouldn't be -- pink cuss wouldn't be for it. simplified form is the way we're trying to go and i thank the witnesses for
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their virtually unanimous support of this he proposal and we will try to move it forward. >> senator higgins. >> thank you, mr. chairman. thank you for holding us here. i want to take one quick opportunity to welcome two panelists from north carolina, mike calhoun and mark schaefer. mike calhoun is the president of the center for responsible lending, which has its roots in durham, and your organization has truly been a forceful advocate for consumer protections in my state and at the national level, then i had many dealings with mr. schaefer as the president of true alliesance, which has 22-member financial centers and approximately $1.4 billion in assets and both of these individuals are exceptionally knowledgeable voices on consumer protection issues and were deeply engaged in these issues during the dodd-frank act. mr. calhoun, i wanted to ask you one question having to do with for-profit
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education. title ten of the dodd-frank act requires the study and monitoring of the private education student loan market, and it is my understanding from hearings in the health education and labor committee that it's common for the for-profit educational institutions to make student loans directly to their students as a way to fill the gap between federal loans and the price of tuition. do you know if these loans would be covered by the bureau's new authorities under dodd frank, and if not, do you believe they should be? >> they are covered and they should be, because this is a mini version of the subprime lending and mortgage problems we saw. these loans are provided to people who are trying to do the right thing, get an education, advance themselves, which helps the economy. importantly, many of these loans are government guaranteed.
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ultimately taxpayers are at risk on these loans. for the consumers they are typically non-dischargeable in bankruptcy except in the most extraordinary circumstances so that student debt follows them essentially to the grave, and there has been repeated studies showing overreaching with these loans providing loanings to people who really don't have the ability to repay the loans are made but for for profit educator gets paid and taxpayers are then left with the bill along with the family, so it is a very serious problem and it's one example where there has been a regulatory gap that needs to be carefully looked at. >> thank you. mr. schaefer, i understand from your temperature that alliance has been forward thinking in its approach to handling overdraft fees, and in april of this year, the pew released the study titled the case for safe and transparent checking
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accounts that highlighted several of the overdraft procedures that may be harmful to customers. can you tell me about the overdraft policies you have implemented and what the as a results have been for your institution and your customers? >> as you know, with the reform, the bad practice, in our opinion, of opt out overdraft protection was eliminated. we never had opt out. we always had opt in so the members were always aware of their options rather than paying high overdraft fees such as a fancy line of credit or takinging a line of credit from their savings. they have indicated willingness to allow innovation and i think in the area of overdraft protection, there is lots of room for innovation. i hate to kind of give a feather to my own competitors but coastal credit union in north carolina and northern credit
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unions both have an early warning notification on nsf charges. we have tried to get my staff to implement a couple of years and we intend to implement it as well. you will get a notice and on your pd. >> would have until 10:00 in the morning to cure it. that type of innovation, we just want to make sure that they backed away from plain van vanilla and that's good because innovation comes from the shops actually trying to help their members so i think we will have ways to redress what we consider overpayment of overdraft fees. >> thank you. mr. calhoun, as you know, when i was in the state senate in north carolina, i worked aggressively to oppose the payday lenders that preyed on the families throughout the state and we were successful in effectively ending that practice in north carolina. under dodd frank, it granted the cfpd certain supervisory and enforcement authorities over the payday
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lenders. do you feel that these authorities have sufficient to curtail the practice and what might be the hurdle that the cfpd is facing org may face in the future as it attempts to regulate these predatory practices? >> well, first, it does have explicit authority there and it's badly needed. we urge the cftb and i think it is moving forward carefully, with a lot of researching, looking at the markets, understanding them, reaching out to businesses, there is as i indicate in my testimony an immediate crisis, though, in the financial banking regulators are allowing our biggest banks to come in and offer payday loans out of the national banks even in states that expressly prohibit those loans. we just think that's the wrong direction for lending in general, but particularly for a nagship institution. -- for a flagship institution. >> thank you, mr. chairman. >> senator menendez.
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>> thank you, mr. chairman. thank you all the witnesses. you know, i'd like to ask, you know, have you seen the cfpb's know before you owe effort? >> i have read about it. i have not actually looked at it. >> have you seen that at all mr. calhoun? >> yes, i have. >> my understanding is it an effort to simplify the mortgage disclosure form to someone who practiced a good time in that field and i'm happy to see the mortgage disclosure forms simplified. >> is the new form being proposed by the cfpb and going to consumer testing right now better than the two existing forms under respa and tilla? >> yes, and my understand something that it has received accolades from both those consumer advocates as well as mortgage lenders and we looked at it through the lens of both being
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affiliated with a substantial mortgage lender, and it's a place where, again, consolidating the authority is what you had for literally more than a decade. you had hud and the federal reserve with both having authority in that area, and being unable to agree on even a simple disclosure form, and it's a place where i think we see the value of the consumer bureau being demonstrated and also we see the care which with which the consumer bureau has moved forward with this proposal. >> you mean this horrible agency has actually done something that prior to its existence no one could create so yet to simplify and create a clear opportunity for the consumer to understand what they're entering into and to get the mortgage lenders and the private sector to actually have a simpler, more modified, more efficient process, is that what happened here? >> that is what is happening
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certainly in the context of this form. >> that's interesting. >> >> what do you think about the complaint process that routes complaints to financial service providers and gathers information about those complaints? >> i think that will be an effective mechanism. now consumers don't know who to turn to and often when they thorn to federal regulatory agencies they do not receive relief. many of the products i have talked about, the state regulatory agencies just don't have any control over either they are racketing under the auspices of a national bank or they are importing interest rates from other states, or quite frankly, the state regulatory doesn't have the funding to address some of the significant needs of consumers. one of the other things that
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i wanted to mention that hasn't been mentioned yesterday yet was the office of financial literacy. i think this is a very important aspect of the consumer financial protection board, because i thunk consumers should be learning about consumer finance even before they become consumers. >> you know, mr. chairman, i want to read some quotes that existed from the chamber of commerce and the american bankers association. all of these are quotes that created concerns about bills that created a new federal financial regulatory bureau, and i think observers will be able to tell which one i'm talking about. quote, there's no important aspect of the economic life of this country, whether it be agriculture or industry banking or congress which will not be adversely affected by this bill. >> nobody with, quote, any practical acquaintance with business process could look at these regulations and arrive at any verdict other than they will cripple and
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retard business rather than help revive it. the fact is even so clear that it is hard to keep from wondering if such a result were not actually intended. this bill is passed by congress is another bill that will destroy our security markets but also interrupt the flow of credit and capital into business, and quote, the bill is so unsound it will ultimately force its own repeal. now, not one of these quotes, mr. chairman, is about the cfpb. each quote is about the creation of the fdic, and the securities and, change commission from the 1930's when they were initially created in response to the great depression. each quote sounds like what we're currently hearing about the cfpb. and was created as a response to the financial catastrophy of 2008, and i just, for the life of me, cannot understand why it is that we have such an
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aversion -- this would be the equivalent of saying well, we don't like what the e.p.a. does so we won't let it have a head. we don't believe in medicare the way it is, so we won't let it have a head of the agency, so we are dress tined at the end of the day -- destined at the end of the day not to have a well performing agency certainly as well as it could perform without having leadership at end of the day that could make sure it is responsive to the congress and the original intentions that we had for this consumer financial protection for it, and the same types of, i think, shrill and overblown rhetoric that has mashed the current debate is what i see in the speeches that took place in the releases that were issued as it related to the fdic and the sec, two entities, not withstanding some of their shortfalls here and there, have acted in the interest of the marketplace, have acted in the interest of investors, have acted in the
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interesting of depositors and consumers. i think that's really the case here as well. >> senator shelby had two more questions. >> thank you, mr. chairman, for your indulgence. >> professor, in your testimony today, you've clearly expressed, i believe, your belief that the occ, office of comptroller of the currency and other financial regulators have not done a good job of overseeing our financial system. i think that's a given. accordingly, do you support reforming the occ and other regulators to make them more accountable? >> yes. >> thank you. mr. calhoun, in your testimony, you severely criticize the office of the comptroller of the currency's actions in the leadup to the financial crisis, noting several a

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CSPAN July 23, 2011 2:00pm-6:15pm EDT

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